End-Games in international Alliances
Most alliances will need to come to an end at some point, so it is important for the business person to consider an end plan from the beginning.
Why Alliances End
1 the alliance is not successful
2 differences between partners (i.e. people incompatibilities, different management styles, disagreement over objectives)
3 breach of agreement
4 the alliance no longer fits the goals/strategies of a parther
5 a partner needs to exit the alliance because of financial difficulties or to take advantage of financial opportunities
6 the alliance has met it's goals
Divorce Scenarios
1 unplanned / planned
2 friendly / unfriendly
3 Both agree / on partner refuses to agree
Outcomes
1 Termination by Acquisition
2 Termination by Dissolution
3 Termination by Reorganization / Restructuring of the alliance
Key issues to consider
An exit clause should be in the agreement
1 conditions of termination
2 disposition of assets
3 disposition of liabilities
4 dispute resolution mechanisms
5 Distributorship arrangements
6 Protection of proprietary information and property
7 Rights over sales of territories and obligations to customers
Non legal issues
8 the decision to exit
9 people-related issues
10 relations with host government
Do's and Don'ts for Managers
- Know as much as possible about your partner
- know as much as possible about the country in which you are going to do business
- ask hard questions before entering the alliance (what are my key assumptions? Worst case scenario? What is most important to me? What am I prepared to lose?)
- don't be afraid to walk away from a deal if it's not right.
- Termination is not just a legal issue, get involved.
- Terminology and phraseology are very important (language)
- Build intelligent flexibility into the contract (what method will be used in valuing assets)
- take time to develop a personal relationship
- Think about the end before the beginning
only those who risk going too far find out how far they can go
-t.s. elliot
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