As the nature of M&A and dealmaking changes, so does the relative importance of partnerships with large, established companies from mature markets. The growing strength of the global challengers means that these partnerships can be negotiated on more equal terms.
Traditionally, partnerships between global challengers and multinationals have focused on access to resources, brands, markets, technologies, and low costs. These types of collaborations will continue, but challengers and multinationals will increasingly come together to develop new products, exchange—rather than transfer—technology, and enter new markets.
While reliable statistics on the growth of partnerships are scarce, the nature of many recent partnerships demonstrates how these relationships are evolving to become game changing.
Technology Exchange. China National Chemical Corporation (ChemChina) and the U.S. company DuPont formed a 50-50 venture in 2012 that combines DuPont’s leading fluoroelastomer technology with ChemChina’s integrated manufacturing. The venture will produce fluoroelastomer gums and precompounds, most likely in a new plant in China.
New Markets. Indian auto player Bajaj Auto and Kawasaki, a Japanese maker of motorcycles and other vehicles, have entered an alliance to jointly market their products. Bajaj and Kawasaki have been partners in various ventures for about 30 years but have rarely collaborated on marketing or selling. The two companies launched a pilot in the Philippines in 2003 that will be expanded to Indonesia in 2013 and possibly to Brazil.
New Products. Indian pharmaceutical company Dr. Reddy’s Laboratories has entered into a deal with Germany’s Merck to jointly develop inexpensive versions of cancer therapies that are losing their patent protections. Dr. Reddy’s will take the lead in early product development and testing while Merck will handle manufacturing and late-stage trials. This division of labor represents a reversal of roles. Typically the company from the emerging market has done the manufacturing, while the mature-market company has done the product development, but Dr. Reddy’s has ample experience in developing low-cost medicines.
New Supplier Relationships. Global challengers are starting to provide expertise, rather than just raw materials, in their supplier relationships with multinationals. Mexichem, the Mexican chemical company, and Occidental Chemical (Oxychem), a U.S. chemicals firm, are exploring the construction of an ethylene plant. Oxychem would convert the ethylene produced by the plant into vinyl chloride monomer (VCM) that it would sell exclusively to Mexichem. VCM is a key ingredient in PVC products, a key product line for Mexichem.
Of course, like M&A transactions, partnerships have their own challenges. (See “The Dilemmas of Partnership.”)