Examples of successful alliances following these strategies, and cited by Martinez and Forteza include:
- An alliance that began in 1991 between U.S. retailing giant Wal-Mart and Cifra of Mexico. It was Wal-Mart’s first experience in international expansion. Wal-Mart eventually became majority shareholder in Cifra, and in 2002 the name of the combined company, Mexico’s biggest retailer, was changed to Wal-Mart de Mexico. Wal-Mart has not fared as well, however, in other Latin countries, Forteza says.
- Unilever has entered into alliances with several companies in Peru and Ecuador. “Alliances in both countries ended up in acquisitions by Unilever,” Martinez says. “Those worked well for all the companies involved. The local companies gave Unilever a good distribution system and Unilever gave the local companies access to its technologies.”
- In 1999, Companhia Brasileira de Distribuição (CBD), Brazil’s largest supermarket chain, announced it had entered into an alliance with the Casino Group, a large French chain. Under an agreement, Casino Group could have an interest of up to 40 percent of CBD’s voting stock by 2004. As with the Unilever alliances, the French company is using the alliance to make inroads into Brazil, while CBD obtains access to capital and technology, says Martinez.
Forteza and Martinez argue that Latin American companies will increasingly look to alliances in years to come as an avenue for growth and that Latin America may see the emergence of more home-grown multinationals.
“From the local group’s point of view, Latin American companies don’t have an option,” says Martinez. “The path to growth in Latin America will be rocky in the coming years. No one sees economic growth as a big avenue. Also, there’s a huge amount of consolidation happening in every industry. You have to do alliances. If you don’t, you’re going to be erased.”
It is also the case, he says, that few Latin American groups have the financial muscle on their own to grow with very aggressive international acquisition strategies. So the only option they have is alliances.
But, Martinez adds, alliances within Latin America are not easy to establish and sustain, in many cases, because families control companies and are reluctant to divulge financial information and share power. “Even if they are publicly held companies, they are tightly controlled,” he says. “Still, because the economic situation in Latin America is more complicated now, people are more open to alliances than they were before. Families that five or six years ago may never have thought about it today are doing alliances even if they lose control of their companies.”
According to Martinez, there’s a window of opportunity for Latin companies to forge alliances as MNCs retrench from their M&A spree of the last decade. “When the stock market was bullish, you could buy almost any company. Now that the market is not so bullish, acquisitions of companies in Latin America by large multinationals are slowing, and that provides opportunities for local companies to form alliances.” According to Thompson Financial Data the number of M&A deals in Latin America has fallen from over 160 per year at the end of the 1990’s to about 100 in the past twelve months, with the total value of these transactions falling from a peak of $55 billion in 2000 to $20 billion over the 12 month period from July 2001 to June 2002.
|“Booz Allen sees some of today's emerging Latin American multinationals eventually becoming competitive outside the region.”|