A new business group wants more success stories. The 3-month-old Silicon Valley chapter of the nonprofit Association of Strategic Alliance Professionals (ASAP) said it hopes to schedule a series of "Alliance Thought Leadership Workshops" this summer to help companies identify acquisition targets or partners and smooth integration after deals are completed.
The hottest segment for alliances is the business-to-business e-commerce sector, said chapter founder Dick Hoffmann. Experts predict that the vast majority of business-to-business virtual marketplaces, many of which connect manufacturers with vendors, will vanish within two years as bankruptcies and takeovers sweep through the sector.
According to a report from Andersen Consulting, the average large company is juggling 30 or more alliances, ranging from small-scale joint-marketing arrangements between companies with some overlapping customers to corporate takeovers.
Despite the fact that the number of corporate alliances has been increasing by more than 30 percent per year for the last decade, most fail. Andersen's survey of 323 senior executives showed that 61 percent of alliances are viewed essentially as disappointments or failures. Only 39 percent are seen to have met or exceeded expectations.
Corporate culture clashes, high rates of management turnover, rank-and-file employee defections, sagging morale and irrational expectations are the main culprits that cause alliances to sour.
Linda Varoli, an analyst at institutional research service Merger Insight of New York, also pinned blame on executives who do not do their homework before inking the deal. The problem is especially rife in the tech industry, where executives working quickly on "Internet time" often rush deals before assessing whether the companies fit well together.
"The biggest thing we've seen is that the companies don't know what they're buying or they overpay," Varoli said. "A lot of times the executives say 'Yeah, we did due diligence.' But then you look, and the confidentiality agreement was signed one week before the merger. I don't care how thorough you are--a week isn't enough time."
ASAP hopes to minimize the high failure rate. The 50-member Silicon Valley chapter is the second worldwide. The first chapter is in Toronto, and others are forming in Washington, Hong Kong and London.
"Most companies stuff their alliances coordinator somewhere between sales and marketing," Hoffmann said. Hoffmann is also vice president of alliances for San Francisco-based Rapt, which develops technology for companies that buy and sell high volumes of goods in fast-moving markets. "Some are just starting to form alliance teams or divisions. It's got to be ingrained in the company from the ground up, before you can learn the wrong lessons."