Difference between the motives for merger v/s strategic alliances?
What are the guiding factors in deciding between the two
Answer:
A merger is where the two companies unite to form a new corporate entity and this functions as a new market force. Whereas an alliance is a flexible partnership which is forged to take advantage of market forces and is not necessarily a permanent arrangement though it could eventually result in a merger.
Ownership and control
A merger is where you combine your business operations and operate as one company. Mergers are more of a long term relationship since both companies will have to change their infrastructure to accommodate each other. A strategic alliance is a short term relationship. Usually just used for a specific project. Then after this project is done everybody goes their own way.
Merger: Greed disguised as vision loaded with spare cash - lots of $$ (greed to expand, get bigger, larger market share, personnel reductions, etc. ) - the acquiring company will want power and control of the outcome.
Strategic alliance: ideally, it should be team work, to complement on each others strengths, distribution channels, technology, etc.
A good way to describe either case would be as "synergy" - the whole will be greater than the sum of the parts. However,bigger is not necessarily better.
Strategic Alliance is a mutually beneficial long-term formal relationship formed between two or more parties to pursue a set of agreed upon goals or to meet a critical business need while remaining independent organizations,Combination of two or more independent business corporations into a single enterprise
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