Forming an Alliance? Plan for Your Break Up
A word of advice for companies thinking about forming a business alliance: Before launching any partnership, make sure both parties agree on how you’ll know, and what you’ll do, when it’s over.
An exit-plan must clearly specify the point of disengagement, tells both parties what their subsequent rights and responsibilities are, and provides a clear and effective procedural map that minimizes time and capital losses. A successful disengagement plan should comprise the following:
- Clear definitions of what both parties will consider as exit triggers, or events that will set off specific exit provisions.
- A detailed description of each party’s rights in a fair separation of the partnership’s assets and products, as well as a determination of rights and responsibilities
- with regard to third parties, such as customers, suppliers and employees of the alliance.
- A detailed description of the disengagement process, including specific strategic options, guidelines for creating the core disengagement team, and clear timelines.
- A communication plan for continuous flow of information to alliance partners, customers, suppliers and other involved parties during the dissolution.
Maintaining transparency with partners, customers, employees and even rivals helps to manage the impact of news about the breakup on financial markets; it also helps maintain morale at the alliance, and helps to preserve any value that remains in the alliance. Lack of transparency leads parties to focus on protecting their own interests without regard for those of the partner, and eventually causes things to implode.
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