Print this article | Return to Article | Return to CFO.com
Risk sharing and investor pressures are pushing executives into joint ventures.
Stephen Taub, CFO.com | US
April 28, 2005
CFOs may have their hands full over the next few years in attending to all the partnership relationships and arrangements their companies have amassed, a new survey of senior executives suggests.
According to the poll conducted by KPMG International, 64 percent of 75 U.S. executives said they plan to increase the use of strategic alliances in the next two years. Meanwhile, 52 percent said they plan to enter more joint ventures during the same period.
Why? Nearly 70 percent said such collaborations help meet growth objectives, in part because they offer the prospect of attractive returns and shared risk. "When companies view alliances holistically, as strategic relationships, they increase their chances of success," said Rob Coble, KPMG’s Southeast Area partner in charge of Transaction Services.
Forty percent of the respondents said that company growth objectives are a top driver of strategic-alliance and joint-venture activity. Survey participants also cited investor and market pressure as two other prime reasons that companies will be keen to work with each other in the near term. The study found that shareholders are clamoring for more growth, while buyers want to see the launch of new services.
Like most major business initiatives, the key to success is in the execution. That recipe for success, according to the poll, includes: correctly balancing alliance goals and overall corporate strategy, involving senior staff in the partnership process, and deriving mutually agreed upon performance measurements.
But don’t expect chief executives to go it alone when making the decision for a corporation to hook up with a partner. A whopping 94 percent of the respondents said that the board of directors and executive management are at least somewhat involved in their strategic-alliance or joint-venture activities. Indeed, more than 60 percent of the respondents indicating they are “very involved," according to KPMG.