Acquisitions can nix existing partnerships

Company alliances are important since they assist business supplement crucial abilities, go into brand-new markets, and gain competitive benefits.

In the pharmaceutical market, tactical alliances prevail since they assist business lower dangers and share the big R&D expenses of bringing brand-new drugs to market– like the collaboration of Pfizer and BioNTech on vaccines. Such collaborations can take years to establish and are important to a pharma business’s success.

When biopharmaceutical business combine, protecting their pre-existing alliances isn’t constantly a concern, according to a brand-new Texas McCombs research study.

“High-performing alliances depend upon trust and strong understanding exchange regimens in between the 2 partners,” discusses research study author Associate Professor of Management Ram Ranganathan. “Acquisitions interfere with both trust and exchange regimens, especially those in between the target business and its partners.”

Ranganathan and his co-authors– Vivek Tandon of Temple University and Navid Asgari of Fordham University– selected to investigate the biopharmaceutical market due to the fact that acquisitions and alliances take place there with high frequency and are crucial to success.

The research study discovered proof that external collaborations– specifically those that obtaining business acquire from target business– might suffer security damage. The research study discovered the chances of termination of alliances that are exposed to acquisitions are 11% higher than for unexposed alliances. Termination chances of acquired alliances are 1.78 times as terrific as the termination chances for all alliances (acquired and noninherited).

The factors alliances are most likely to be ended consist of:

A Lot Of to Manage: When one business purchases another, including brand-new alliances to its existing portfolio can worry the acquirer’s capability to handle the now-larger portfolio. This impact is decreased if the 2 business share typical connections.

Too New to Retain: Older alliances are less most likely to be ended than more youthful ones. Target business alliances, which can cover numerous collaborations, end up being more difficult to sustain. Those with greater capacity for novelty end up being more unsteady.

Expense of Cancellation: Ranganathan’s research study recommends that business miss out on chances by ending or harming existing alliances. If they kept these alliances, acquirers might reinforce their collaboration networks and recognize brand-new synergies. He states, synergies are a huge factor most business combine in the very first location.

Divestment of Relational Assets Following Acquisitions: Evidence from the Biopharmaceutical Industryis upcoming, online beforehand in the Strategic Management Journal

More info:
Vivek Tandon et al, Divestment of relational properties following acquisitions: Evidence from the biopharmaceutical market, Strategic Management Journal (2022 ). DOI: 10.1002/ smj.3456