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Summary
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When to think alliance
Equity markets judge mergers, acquisitions, and alliances quickly—and often harshly. The authors' study of 2,100 companies shows that the stock market responds sharply to announcements of mergers or alliances, that it favors some types of transactions over others, and that this market response is a good indicator of a deal's long-term prospects. In volatile, fast-moving industries, such as electronics, software, and the mass media, alliances were heavily favored over mergers and acquisitions. They were also favored for building new businesses, entering new markets, and developing new capabilities.

The take-away: Managers are often pressed to "do an alliance"—and strategic agreements can indeed confer quick benefits on the partners. But nearly half of all alliances fail. It is necessary to know whether and when alliances, mergers, or joint ventures create the greatest amount of value.
  


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