Thirdly, shareholders in Latin America are concerned about having all their eggs in one country basket, especially because of currency problems. “They’d rather have a collection of troubled countries than only one to hedge the risk,” observes Martinez.
Latin America is seeing more alliances among its own multinationals. In early summer 2002, it was announced that the Bemberg family, the controlling shareholder of Quilmes Industrial (Quinsa) S.A., known as Quilmes, a leading beer producer in Argentina, agreed to sell its stake to Cia de Bebidas das Americas, better known as AmBev, a leading brewery in Brazil.
“The idea is to create a leading company in the southern cone. It’s an excellent example of a strategic alliance among emerging multinationals,” says Jorge Forteza, senior vice president at Booz Allen and president of Booz Allen Argentina.
The deal ran into complications, however, when Heineken, the multinational Dutch brewer, announced that it wished to acquire a 37.5% stake in Quilmes and would match AmBev’s offer. Heineken already owns a 15% stake in a joint venture with Quilmes International Bermuda Ltd., of which Quinsa owns 85%, and said it was waiting to expand its stake in Quilmes when AmBev announced its offer. According to the news agency AFX, the Quilmes deal with AmBev has been blocked until Sept. 15, 2002, pending a ruling by the Paris International Chamber of Commerce in a case brought by Heineken. If the court rules in favor of Heineken, the company said it remains interested in acquiring the stake.
The Promise and Pitfalls
In a 1994 article, “A Practical Guide to Alliances: Leapfrogging the Learning Curve,” two former Booz Allen partners, John R. Harbison and Peter Pekar, Jr., defined a strategic alliance as a cooperative arrangement between two or more companies in which “a common strategy is developed in unison and a win-win attitude is adopted by all parties.” What is more, the alliance is reciprocal, with each partner prepared to share specific strengths with the other, and the parties are willing to pool resources, investment and risks for mutual advantage. A strategic alliance, these authors wrote, “fills the middle ground between transactional arrangements and acquisitions.”
Harbison, who joined Raytheon Company in February 2001 as president of Raytheon Commercial Ventures, Inc., and Pekar, currently a vice president at investment bank Houlihan Lokey Howard & Zukin, note that strategic alliances are not necessarily better or worse than sourcing relationships or acquisitions. But alliances often are the preferred way to go when acquisitions are not feasible due to constraints on cross-border controls or financial limitations or when relevant capabilities are inseparable from the parent.
|“Local companies are expanding through cross-border deals to achieve the size and scale to compete in the region with global players.”|
Wharton management professor Harbir Singh, who has written extensively on mergers and acquisitions, says that while strategic alliances and acquisitions can create value, most studies have determined that about half of them fail. The reasons for failure may include lack of strategic fit in terms of complementary resources; lack of organizational fit in terms of cultures, decision-making processes and systems; lack of trust; inappropriate choice of a governance structure, and inability to manage conflict.
Singh and two colleagues – Jeffrey H. Dyer, of the University of Michigan Business School, and Prashant Kale, of the Marriott School at Brigham Young University – have also studied how companies learn from experience and analyzed certain steps these companies can take to tilt the odds in favor of establishing a successful alliance.