A strategic partner is another business entity with which you form an agreement to share resources with the mission of growth and mutual success. There are different types of strategic partnerships.
- Horizontal Partnership: Businesses within the same field join alliances to improve their market position. Example: Facebook and Instagram.
- Vertical Partnership: Businesses team up with companies within the same supply chain (suppliers, distributors and retailers), often to stabilize supply chains and increase sales. Example: LiveNation and Ticketmaster.
- Equity Partnership: An investor acquires a percentage interest in a business, providing needed capital and sharing in profits and losses.
- Joint Venture: Two or more businesses form an entirely new legal entity in which the profits and risks are shared, and the original companies continue to exist on their own. Example: Microsoft and NBC’s creation of MSNBC.
- Merger: Two companies agree to go forward as a single new company and the original companies no longer exist. Example: Exxon and Mobil, now Exxon Mobil Corp.
- Acquisition: One company takes over another company and establishes itself as the new owner. Example: AOL and Time Warner, now Time Warner.
Why Do I Need One?
A strategic partnership can be an extremely powerful tactic that gives your business a competitive edge. According to a study by the CMO Council, 85 percent of business owners believe partnerships are essential for business success.There are several reasons why it is a commonly relied-upon growth plan.
- Expansion into new markets
- Increased brand awareness
- Product line extension
- Access to new customers
- Improved supply chain performance
- Added value for existing customers
- Acceleration of innovation
- Strengthening of weaknesses
- Sourcing of capital
A successful partnership must be built on a solid growth strategy and make sense from a capabilities perspective. The goals, values and culture of all partners should be aligned. You also need to have the right infrastructure in place. And the timing of the venture can be critical depending on the market. A partnership is a major endeavor and you absolutely want to get it right. Unfortunately, most organizations are not armed with the proper connections, resources and management capabilities to maximize the potential of a partnership. According to a report by the Business Performance Innovation Network (BPI):
- 43 percent of business partnerships have high failure rates.
- 45 percent are unable to maintain long-term, successful relationships.
- 42 percent of partnerships are not well leveraged.
- 67 percent of companies that agree to work together lack formal partnering strategies.
How to Get It Right
The smartest way to ensure that you are entering into a successful partnership is to seek the guidance of an advisor such as Benchmark International. We have the connections, experience, data-driven analytics, and knowledge to help you devise a carefully crafted growth strategy that is built on confidence and captures the most value. If you are a founder, an owner, an entrepreneur, or part of the leadership of an established company, we encourage you to reach out to us and start the conversation about how a strategic partnership can benefit your business.
Americas: Sam Smoot at +1 (813) 898 2350 / Smoot@BenchmarkIntl.com
Europe: Michael Lawrie at +44 (0) 161 359 4400 / Enquiries@BenchmarkIntl.com
Africa: Anthony McCardle at +27 21 300 2055 / McCardle@BenchmarkIntl.com
ABOUT BENCHMARK INTERNATIONAL
Benchmark International’s global offices provide business owners in the middle market and lower middle market with creative, value-maximizing solutions for growing and exiting their businesses. To date, Benchmark International has handled engagements in excess of $6B across various industries worldwide. With decades of global M&A experience, Benchmark International’s deal teams, working from 12 offices across the world, have assisted hundreds of owners with achieving their personal objectives and ensuring the continued growth of their businesses.