Alliances && Acquistions

      Chapter 11 focuses on making alliances and acquisitions between companies that actually work. Unfortunately, many firms find it difficult to evaluate the true intentions and capabilities of their prospective partners until it is too late. Chapter 11 not only introduces equity-based joint ventures but it also illustrates this further depicting alliances as degrees of compromise between pure market transactions and acquisitions. The first alliance that is introduced is contractual (non-equity based) alliances these are associations between firms that are based on contracts and do not involve the sharing of ownership. In contrast equity-based alliances are based on ownership or financial interest between the firms. These include strategic investment and cross-shareholding. Cross shareholding is when each partner invests in the other. I am familiar with cross shareholding, because my father, an entrepreneur, currently practices this alliance within a few of his companies.
       Currently, my father has a business which involves real estate in Florida. He and his partner both invest money in order to flip houses that have been foreclosed on in the real estate market. My father has the background knowledge and connections in order to remodel homes cheap, quick, yet, efficiently. His partner is a previous real estate agent who has the knowledge of what homes are currently on the market and for what price. My father and his partner both invest money in order to purchase the homes and then split the profit right down the middle. However, after being working with this company for a year they both decided to move up on the housing market and begin purchasing larger homes which also cost more money. Therefore, they decided to form alliances with multiple business men but just as investors. They needed more start-up money in order to purchase this higher level of real estate. After forming alliances with several other investors they needed to figure out how the profit would be divided up. Unfortunately, sometimes homes would not sell and therefore they would have to let them go at a lower asking price creating them to lose more money then expected. When these situations would occur, they would then find themselves in deeper debt then where they began owing more alliances money then just themselves.
      Alliances create more opportunities however they do not always play out as planned. I have observed from my father's mistakes and have gathered when I go to start up a service or business I will eventually practice cross-shareholding but make sure to have all possibilities planned out on paper to know how to deal with these issues as they come up. Four factors that may influence alliance performance is (1) equity (2) learning and experience (3) nationality and (4) relational capabilities. Before I experiment with cross-shareholding I will make sure I exhaust all possible outcomes and also perfect the factors that may influence our alliance.