When are Strategic Alliances and Joint Ventures a Viable Alternative to M&A?

“Finding a partner that can execute on the distribution side of an alliance can lead to a highly profitable arrangement.”

Our experience has positioned us as industry-leaders equipped to provide strategic M&A guidance in today’s murky regulatory environment.  As a firm, one of our most important charges is to help our clients make decisions that lead to the most profitable outcome – and contrary to common wisdom, a merger or acquisition isn’t always the best path.  When one party is looking for a unique set of criteria to satisfy interests, a joint venture or strategic alliance becomes a more appropriate course of action.

An ideal partnership allows an organization to stay committed to a certain set of interests while its new partner satisfies a different (but aligned) set of goals.  This enables the organization to stay on its strategic course and retain control of key areas of the business.

Interests in this case typically refer to the business goals that are motivating a seller.  When interests are aligned but separated between organizations, the pathway to a cohesive relationship becomes clearer.  For example, when our client MTF (Musculoskeletal Transplant Foundation) began an alliance with CONMED, it proved to be the right strategic move due to each organization’s unique strengths.   When MTF, the nation’s leading non-profit tissue bank, added distribution of tissue to its primary mission, it became stretched for resources. While it was a profitable venture, it was not a core competence of the organization.

MTF therefore set out to find a partner that allowed them to keep the focus on processing tissue for transplantation while still getting the product to market.

Over time, MTF hooked up with major companies that could help them get their products to market: like Johnson & Johnson as a distributor of its spinal tissues, and CONMED Linvatec as a distributor of its soft tissues for sports medicine.  MTF’s network of strategic alliances created more value for the stakeholders while allowing the company to refocus energy on its primary goal of advancing science.  Through an alliance, MTF successfully had its interests satisfied while keeping its core competence a focal point.

Our clients ask us when a joint venture or strategic alliance is the most sensible option, and our answer is simply: when 2 companies with separate interests align to accomplish a clearly defined goal. 

The med tech industry boasts an environment that is ripe for creative alliances that allow companies to advance their strategic values and set the stage for long-term growth. To read more about our involvement with MTF read our case-study here: CASE STUDY: MTF/MTF Inks Agreement With Conmed, Near-Term Value $147 Million Dollars

A more in-depth look at strategic alliances also appeared in the October 2013 issue of Acquisition International.