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start from scratch, adquisition, Jv pros/cons

In general terms - thinking of the pros and cons i have some trouble differentiating adquisition vs jv. 

Pros start from scratch: 

Control of quality 

You keep your brand/brand recognition

Cons: high entry cost/ R&D, higher costs to exit strategy, barriers to entry, unexperienced in market

Adquisition: 

Pros: you keep control of quality, You can keep your brand, lower barriers to entry, expertise from company bought

Cons: High cost, high exit costs

JV: 

Pros: work with a company that is established in the area (is that always the case?), lower entry costs, lower risks 

Cons: not your brand 100%, barriers to entry? 

What do you guys think?

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Gelöschter Nutzer
am 8. Juli 2021

Broadly agree, but there are some nuances

1. Capabilities

- If you want to build new capabilities and you want ALL of the target's capabilities than Acquisition is preferable. If you want specific capabilities of the target, then JV

- If you want to enhance existing capabilities, then acquisition helpful if the targets products & services align with your business

2. Control

- Acquisition preferable if you want control on how target business is run
- This is usually the case if i) deal involves complex products & services,ii) those involving longer time horizon or capital outlay
- JV preferable if you want to access target's products & services, but not want to control operational aspects of their business

3. Return on investment & risk

- Costs of M&A > JV typically
- Therefore must consider i) ROI of deal ii) Risks of deal
- JV preferable if the value / efficiency of the acquisition < costs / risks of the acquisition

 

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