Alliance Partnerships, Integration, and the Sharing of Information

            Alliances are classified by the degree of formality and by duration.  They are business agreements made by two or more companies often for a competitive gain purpose.  The more formal the relationship, the longer in duration.  There are six types of alliances (White & Bruton, 2017) identified as Joint Ventures, Franchise Agreements, Consortia, Licensing Agreements, Subcontracts, and Informal Understandings.  In Joint Ventures, two or more firms or companies combine equity to form a new entity with a detailed agreement covering provisions, expectations, and operational plans.  In Franchises, a business unit or unit(s) are sold to the Franchisee to sell or work under the company’s trademark.  The contract is formal and between two parties typically specified by timeframe and region with rights to conduct business activities, based on a set of business rules and standards.  In Consortia’s and Licensing Agreements, one or more companies or several organizations join to share expertise and funding for developing, gathering, and sharing new knowledge.  Licensing Agreements differ from Consortia’s because they are company agreements offering rights to manufacture, use, or sell a product or part of a product.  Licensing agreements are written to control aspects of the product and its uses, such as distribution, copying, and changing of the product.  Subcontracting is another type of alliance, often known as ‘outsourcing’ or hiring a third party as part of a contract to have work done which creates an interdependence where the primary contract exists between company and buyer or other party, with the subcontractor only responsible to the main contractor and not the buyer or receiver of goods and services.  These different types of alliances or partnerships and ventures are done to combine talent and expertise for a specific intended purpose, such as a job, a new venture, a purchase, or to gain in competitive advantage to offer better products and services.  Companies and firms acquire technology companies to combine technology or to gain in capability in order to grow their product base which has been known to improve their suites.  In some cases, small competitors are acquired to gain some technology or to merge with larger corporations for better economic survival and organization of the technology.   

            Information sharing amongst each type of alliance is dependent upon what type of alliance, as are contractual obligations and responsibilities.  More formal alliances require detailed written agreements, with specific criteria for agreements, payment, planning, and warranty or legal remedy with formal risk analysis, detailed work products, and cost estimation.  Less formal alliances don’t rely heavily on formal agreements, as they intend to or begin working together because they do not foresee legal problems or the need for legal documentation, mainly because they are short term, low cost or value, trusted, and low risk without necessity for legal and financial documentation.  Formal alliances, such as company mergers and acquisitions, where a formally organized legal business sells its business and assets to another company, legal documentation is required for filing and even more formal record-keeping and agreements are required for publicly shared companies who trade shares in the stock market.  Mergers are formal alliances and require formal documentation and agreements when financials begin to intermingle, and practices change because of the necessity for financial reports to boards, owners, shareholders, and government entities.   This is also true for the acquisition of technology companies, with a different type of business integration plan.  The sharing of company private information of competitive or profitable value is necessary in most alliances, therefore formal and non-formal disclosure agreements are made to protect trade and business secrets, as well as profit sharing agreements and projections, especially important for market share information that affects stock prices. 

When a company or firm decides to shop for a technology company to buy or merge with, it is often because they have an internal business system or product that will work well with or benefit the buying company.  The plans are usually made to use the technology in the company or to sell it and add to its technology using development or to adjust its product lines to expand its offerings.  Considerations for these types of purchases are how will the technology change business operations and contribute to the bottom line, how will it affect human resources functioning and climate, and what is the expected magnitude of the change in different business areas?  If the acquisition of a technology company is planned for product integration, then the acquiring company must have a development and integration plan, as well as understand the technology as best as it can before purchase.  Many unknowns are uncovered after purchase, which must be managed; these are areas of risk because plans have a likelihood or greater chance of changing because of critical parts of a technology implementation project.  Technical details such as compatibility, ability to change the product, experienced talent to modernize the product, or to use and implement it as is important parts that should be known.  Once technology is acquired, maintenance and use for its new owner and any new user plans must be designed and tested.  Good deals made with technology companies often are made after demonstration and short tests in the new or changed environment for a deal to be considered successful, with success and acceptance criteria clearly defined.  These are not the same procedures as buying technology from a store.  Business acquisitions are a bit different than technology company acquisitions because when a business buys another business, they must consider how to adapt their people, processes, and policies, while maintaining and improving, as well as combining operations for a specific result or strategic goal.  The acquisition of a technology company is different because it is the technology that the company seeks to buy, not the entire company’s operational structure, but before viewing it as a product only type of purchase, the buying company must decide or plan how it will use the newly acquired company’s resources that come along with the company.  Acquiring a technology company cannot be considered the same as one business buying or merging with another because it might be buying talent and development expertise, software or hardware products, manufacturing processes, and agreements, and is simply viewed or implemented as a ‘new management’ team or company name with some process change to ensure the company culture or climate changes to create the synergy needed for people of the company and its buyers or users to see the difference.  This part of the change is related to company branding or marketing and management structures, where employees can clearly see and know who they work for and what the company goals and objectives are.  Business operations and management structure decisions must be reviewed and considered before acquisition because if the technology is fully developed and requires only maintenance, and new or existing talent can manage it effectively, as well as modernize it, then there is no need to maintain the same business operations.  This means people will be laid off, while others might be extended better offers or promotions.  If a company purchased a technology company that developed automated systems where the requirement for human resources was reduced by 45%, then layoffs and lower operating costs can be expected.  This changes the operating structure and is sometimes shocking for companies, which is often why acquisitions and mergers are kept secret and confidential until the deals are finalized and can be fully implemented.  If a company acquired a technology company for its development and technology management talent to invest in a new innovative design for a specific product, then it should expect and plan to make room for new employees, projects, and plan for investments and profits.  The plans depend upon the intent of the acquisition, either for talent or physical products, operational functionality, or because of well designed product integrations.  Sometimes there is no need to maintain the original design staff after the product is fully functional and planned for integration with another product, although the acquisition company might consider reassigning or reallocating those resources for other ventures of like or similar projects.

Oracle and Cerner Healthcare Merger

            In its news release for the acquisition of Cerner, Oracle outlined some worthy goals for the acquisition, including building cloud software systems that enable doctors to spend less time on admin and more with patients.  The acquisition of Cerner, a healthcare technology company by Oracle enables the software giant to gain technology in the healthcare sector. “Working together, Cerner and Oracle have the capability to transform healthcare delivery by providing medical professionals with a new generation of healthcare information systems,” said Larry Ellison, Chairman and Chief Technology Officer, Oracle (Oracle.com, 2022).  Plans for Oracle are to release a new Cloud Based Healthcare System to improve information sharing.  The database cloud company bought Cerner to improve its systems and believes the partnership will modernize healthcare systems so they can be a leader in healthcare markets.  This type of moves adds a competitive business unit to their company, giving them the technology and expertise needed to perfect healthcare systems, something they might have considered developing or hiring talent to bring to their business profile or technology capability.  A merger like Oracle requires integration planning for Cerner to become part of Oracle, whether it is to utilize its existing technology of cloud systems, but also to modernize healthcare and be the industry leader.  The goals mentioned in the press release implies that time management is one of the major things they seek to change in the industry yet plan to create systems that enable patients to manage more of their own healthcare data. 

Obtaining Technology:  The Implementation Phase

            First, technology is obtained or developed and then it is implemented.  A plan to acquire or develop is created with a high-level plan and once the costs and benefits become known and offers are made, negotiated, and accepted, a more detailed implementation plan is created.  Some call it integration plans, while others call it implementation.  Implementing an ‘acquisition’ is viewed differently depending upon the size of the deal.  A small purchase or company acquisition or technology acquisition requires minimal planning because its impact is low, change is minimal, and easily managed because it is a routine purchase.  Other larger acquisitions that change business structure, process, operations, and finances require more detailed strategic planning and management for successful implementation.  These projects have been known to go on for years at a time and profits are not immediately seen.

Sometimes, detailed plans can be created prior to acquisition, but the plan to acquire is different than the plan to implement the acquired technology.  The plans to acquire should link to the strategic organizational goals and the value should be known to the company, some not often a numerical value of direct profit estimates, but in obvious returns.  The ‘mood’ or ‘tone’ of the alliance or acquisition should be stable, not emotionally driven or with hidden or devious agendas (White & Bruton, 2017).  The acquisition process should be designed using best practices with a review of lessons learned, if available.  Company reputation and perception is also an important part of the acquisition planning because it affects most deals, as well as post acquisition plans or projections with information and change controls managed.

            Integration is a part of acquisitions and mergers after the deal is complete but should be planned and known prior to the end of the deal.  Full implementation and total integration cannot be expected to be finished as soon as the deal is closed, but high-level implementation and integration planning should.  In mergers, integration is necessary to merge or combine two operational companies and in acquisitions, one company or product line and technology must mix in with the acquiring company, therefore it requires detailed understanding of the technology, how it will be implemented and integrated, and what results are expected.  Location was often a necessity for mergers and acquisitions, as well as the standardization of processes and operating agreements, but much has changed with the ability to work remotely and exchange information electronically.  Much of the critical factors of an effective merger or acquisition is the ability to function and gain in efficiencies and capability without damage or serious disruption to the existing companies.  Expectations are later detailed, post-acquisition, but a good understanding and high-level projections can be made before and during the acquisition to create reasonable buying terms.  It’s never easy to project what will happen five years post acquisition, although a plan with goals can be created, followed, and become more detailed with obvious measurements proving its value.  Depending upon the type of acquisition, the implementation varies because the type of agreements vary, as does implementing the new agreement or venture.  The purchase of a Franchise is not the same as the creation of a subcontracting agreement, mainly because timeframes, costs, operations, and locations are different, therefore each type of venture or alliance has a different plan or way of putting it into action or ‘force.’ 

Acquiring Technology Example

            A company is considering outsourcing its event management staff because it has regular functions that require party planning, catering, venue scheduling, invitations, and attendance monitoring with security staff and other standard processes on a regular and reoccurring basis.  The administrative assistants usually perform this task, but it takes away from their assigned responsibilities which are project based for other purposes.  The company uses various technology products to complete these tasks and after reviewing the marketplace for event companies, they found no company offers the service using technology for tracking, scheduling, and the management of events, information, personnel, and activities.  This is a requirement for the company; therefore, they have assembled a team of technology professionals to identify the best technology used for the task, set a plan for integration, and build a product for internal use only.  Once fully tested and found secure and reliable, they plan to offer the technology product to their business partners, clients, and possibly even competitors for use.  Once it passes a test, they will add it to their first line of internally developed technology products for use, but they must create an integration plan, decide what to develop, integrate, or acquire, establish a business unit and sales strategy for their software product, taking many areas into consideration, including data management services, security and protection professionals, contact management, location selection, privacy, and identification processes for electronic rsvp and the gathering of large groups who work with sensitive and confidential information that require higher levels of security.  They require an all-encompassing solution to handle event marketing, people management, invitations, venue selections, participation numbers, subject matter and business materials, and record keeping with historical audits, comparisons, and financial information for profits, costs, as well as other connected event related data for time sets.  No technology exists, but they have a good understanding of what they want and need, and they have the technology professionals ready to add to their strategic goals of growing their clients and partnerships and wants to begin an integrated development project capable of use by more than one company.  The innovator has asked for a detailed report on the potential profitability of an integrated solution with comparison to existing process and products.  The results became a technology product that offers integrated event planning and management capable of marketing, connecting people, things, information, as well as results or outcomes of events applicable to any organization or company that organizes events with strategic goals.  They integrated strategic planning, event management, human resources, sales, and marketing by industry, and created a strategic planning department with technology and created a new profitable business service made from technology subscriptions and use fees.  Their sales strategy was simple because it saved serious amounts of planning time, offered an integrated technology solution with easier management, and a more connected and secure solution with ability to review post-event reports and statistics tied to the event’s goals.  This is expected to become a necessary technology product for all companies who create events.  In a short product comparison, its capabilities, cost, and benefits far exceeded what was available in the marketplace.  This is an example of how one innovative idea can lead to product development that leads to major profits and possibly industrial change in technology development.  More innovative designs would’ve included the acquisition and development of existing technology or a partnership with a technology provider.

Management Advice on Technology Acquisitions of the Same Size

            Two organizations of the same size who work together in a Technology venture seek to combine their funds to buy technology.  In this type of alliance, they are considered a joint venture, working together to combine financial assets or equity to purchase capability.  This requires use agreements, as well as a good understanding of profit comparisons, maintenance agreements, duration of agreement, and operating plans.  It requires clear agreement in formal terms to show how the separate equity is combined into a fund of short or long-term duration to pay for the technology, the responsibilities and terms of payment, the legal remedies in event of breach, as well as formal agreements on the sharing or operation of the technology and any plans to profit.  Ownership and use details must be detailed.  Implementation of the technology is important because it includes costs, change, and creative managers might want to spend time considering how the businesses can help each other during the implementation.  This type of agreement requires a good understanding of both companies’ operations and plans, especially why they choose to buy together and use separately, either as active users, or as silent financers for the acquisition.  They might consider paying one company to test the product operationally before implementing because it’s lower risk to one company than another and can financially manage its success and implementation to gain experience where there is greater impact and risk.  Choosing to buy technology with a smaller company makes sense to implement it and test it in a similar, yet smaller environment to estimate and plan correctly for a larger scaled implementation.

Five Places of Evaluation and Control

            The five places where evaluation and control happen in externally focused processes are: 1) Examining alliance/acquisition capabilities of the firm, 2) Performing due diligence prior to obtaining the technology, 3) Negotiating the deal, 4) Integrating the new technology into the existing systems and structures, and 5) Ongoing evaluation and control of the processes to obtain and blend external technology (White & Bruton, 2017).  Some goals for acquisition are expansion based, either in technology capability, market share, location, or number of employees in a specific technology talent area.  These are acquisition considerations and goals not directly geared toward ‘acquiring technology’ only, but to grow in technology by the acquisition of technology resources which are things, such as people, places, processes, and products.  The decision to form an alliance or to acquire is another decision, based upon their willingness, plans, or needs to work together as a functioning unit, or as a buyer with specific intent on items it plans to purchase, and those items that are no longer needed, such as other technology like a Human Resources Technology System, a payroll system, or other products and processes that are already in place and well-functioning in the buyers unit.  Those are items considered no longer necessary and in excess post acquisition, therefore the buyer and seller must have plans for the assets use or divestiture.  Many companies’ technology infrastructure is subscription-based software, with technology assets that may or may not be included in the deal.  The assets of the companies forming alliances and possible acquisitions must decide how these will be handled.  Sometimes alliances and acquisitions are initiated because there is a part of something that one company has that another company wants or can use and benefit from and or they can use together to create something new.  This doesn’t include all parts of both companies, which is why they need detailed operating plans of all parts of the agreements, either total acquisition of the entire company and its assets or parts and in some cases, this is applicable to only technology. 

Why would a company seek to buy or partner with another company for the use of its owned technology and not just buy directly from the manufacturer or other product dealer?  Because the technology is in operation, its talent is trained, and its data or processes and accompanying resources are functional and already profiting.  Sometimes buying technology from a dealer requires customized implementation, when a company might be better off buying a smaller company that already uses it and can slowly integrate it, while gaining profits and market share of acquiring a business of similar type.  If a company chooses to acquire another company because it has a physical location, assets, and qualified human resources, then it is buying the company for what it produces and not what it owns, therefore it must decide how it plans to change the newly acquired business for its purposes.  Companies don’t often acquire other companies because they have a nicer building and location; that purpose is for real estate sales.  They acquire companies to gain skill, market share, or grow in numbers for better production rates and profits.  Companies acquire technology to make their operations more efficient or to invent and innovate.  It is not a simple buying process where a financial transaction is made, and everything remains the same.  Acquisitions create change where new technology is implemented and new strategic goals are set and achieved.

Acquisition Plan for Technology Integration

            A firm identified a significant area in need of internet innovation.  There are only a few companies with existing technology that only partly solves the problem identified in a study.  They needed to decide whether to work with companies who have a portion of the technology as partners in an alliance, or to acquire the part of the technology from the existing company, or to build their own now that they’ve seen what the leaders are doing and understand the problem.  Rather than to build technology to solve the problem, or to buy parts of technology that control this area in need of change, they decided to utilize policy and direction to create industrial change.  This is not a part of acquisitions, but a consideration of acquisitions because the company’s profits were better suited for agency services and corporate mergers and acquisitions.  Although it might seem that the World Technology Business Sector of the Firm could gain in market share if it developed its own profile management system, it strategically decided to place its investments in government and agency service agreements to affect change on a greater scale, and be true market leaders in a more organized and structured way to secure future opportunities with existing clients, while gaining greater industrial and market control of a high-risk area.  Ownership of such as system seemed to give them the keys to the world if developed and managed properly but pursuing opportunity and utilizing existing business contracts better secured future opportunity and promised greater protections for the information security field.  This was an ethical business matter of competitive consideration made for the greater good of the world and its people and not for the ‘competitive’ market share that most publicly traded companies seek to gain from.

Summary

            The acquisition of technology is sometimes viewed as an innovative strategy to gain in capability by buying out another company to eliminate the competition or to modernize business.  These modernization efforts create change in structure, operations, and outputs.  Sometimes the changes are not directly visible, requiring strategic planning.  Partnering to obtain technology either via alliance or acquisition for either single product, process, platform, or entire portfolios with risk assessments of cost, time, technological, and competitive with assessment parameters ends in a review of alternatives and decisions.  The decision to acquire is just the beginning, then follows the implementation of the plan, which is an implementation project of varying degrees and complexities where no one ‘standard’ implementation plan fits all decisions and alliance or partnership types.  Each one can be dissected and automated but selecting the right combinations for optimum industrial management and control is the challenge, with the goal being effective technology systems without damaging economics.

“Deals are being evaluated for their effect on public policy, not just their value.”  Larry Grafstein, Deputy Chairman, Global Investment Banking.  In the future, factors changing the way deals are planned and completed are the new ways of “being” (working from home, social distancing, etc.), new opportunities in innovation, shifting industry paths (i.e., Disney shifting focus to their streaming platform Disney+ rather than theme parks), and the future of capital investment. With all these drivers affecting the process of M&As, EA support is more critical than ever. Now that stakeholders and IT professionals have to plan and complete deals and projects remotely, having a way to document the entire M&A process, reduce IT risks, accelerate synergies, and provide a single source of truth is the way to ensure success (LeanIX, 2022).

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By Sheri