STRATEGIC ALLIANCES

A strategic alliance is a formal relationship between two enterprises, usually formalized by one or more business contracts but falls short of forming an actual partnership, principal-agent, or affiliate relationship. It is often loosely called a strategic partnership but it does not imply that a true partnership exists.

Typically two companies form a strategic alliance when each possesses one or more business assets that will help the other but that it does not wish to develop internally.

One common strategic alliance involves one company providing engineering, manufacturing or product development services, partnering with a smaller, entrepreneurial firm or inventor to create a specialized new product. Typically, the larger firm supplies capital, and the necessary product development, marketing, manufacturing, and distribution capabilities, while the smaller firm supplies specialized technical or creative expertise.

Another common strategic alliance involves a supplier / manufacturer partnering with a distributor or wholesale consumer to participate together in advertising, marketing, branding, product development, or other business functions.

There can be many advantages to creating strategic partnerships. Firms taking advantage of strategic partnerships can utilize other company's strengths to make both firms stronger in the long run.

Strategic partnerships raise questions concerning co-inventorship and other intellectual property ownership, technology transfer, exclusivity, competition, hiring away of employees, rights to business opportunities created in the course of the partnership, splitting of profits and expenses, duration and termination of the relationship, and many other business issues. The relationships are often complex as a result, and can be subject to extensive negotiation.

Nick Yocca is adept at counseling clients in planning and negotiating strategic alliances and drafting and negotiating of the governing contracts that establish them.