Corporate development is more than just doing M&A. Sometimes, acquiring a company isn't the best way to achieve the organization's growth strategy. There are a variety of approaches to accelerating a business that requires extra analysis and planning. This article will discuss growing beyond M&A with Christina Ungaro, VP, Head of Corporate Development at Wind River.
"Business strategy is all about finding the intersection point between what customers are asking for, where the market opportunity is, and what can be reasonably delivered." - Christina Ungaro
Developing the strategy is about creating a strategic roadmap outlining where the organization wants to go. The first step is to determine the gaps in the organization and the solutions to fill them. From there, perform a buy-build-partner analysis.
With that in mind, buying or building is permanent. If the acquirer doesn't want to own the capability or they don't want to compete in a new market, then partnerships are the way to go. Here are different ways to grow your business aside from M&A:
To create a successful partnership, both parties must benefit from the relationship. Develop a vision for success, put concrete parameters around it, and create a path where both parties can thrive.
"What you don't want to do is create a partnership that's dependent on just two people in each respective organization. You want to create something that will survive changes." - Christina Ungaro
Partnerships are relationship-driven; the most significant risk is when the people involved change roles. To mitigate this, put good processes together with good documentation, and enable multiple internal organizations around the partnership. It will increase the chances of the partnership surviving, even if the champion is no longer involved.
It is also an excellent introduction to M&A. Partnerships can serve as a preview of what it's like to work with the other party. It's commonly referred to as the "try-it-before-you-buy" strategy.
If both companies have something unique to bring to the table, and there is not much friction in their existing business, then a joint venture is better. However, a joint venture can be messier if the two parties contribute existing assets, people, and contracts.
The primary differentiation of a joint venture is that it requires creating a new legal entity. Also, It has an expiration date and doesn't last for perpetuity.
Minority Investments are a type of equity funding where the investor takes a non-controlling stake in a business in exchange for capital. Minority investments are a good solution when the investor is in a strategic partnership and depends on the target company. It demonstrates a long-term commitment to the partner that will be protected even if they get acquired or change business directions.
Also, performing a minority investment will give special access that the investor otherwise wouldn't have, such as information rights, board seats, and M&A notifications. In addition, it provides the investor with direct influence on their product roadmap and overall business strategy.