In bed with the enemy

"Mergers happen for two reasons – to secure competitive advantage by taking over others in the market, or to improve the cost base,” says Andy Tinlin, global head of M&A strategy at Accenture. “Now people are looking at different routes to achieve the same thing. Collaborative ventures are being seen very much as an alternative to M&A.”

The recession has prompted a number of businesses to take a different view of their competition. Rather than see companies in the same industry and market as rivals, they can instead be useful ways to extend distribution, cross sell and freeze out other, more dangerous, competitors.

Stuart McKee, a corporate finance partner at PwC, says: “Every business has some part on which it could collaborate. . . with a competitor. The market is telling us that there’s an appetite.”

“It could be a direct competitor or a firm with similar characteristics," he continues. "By merging facilities – such as a sales or booking system – companies make use of one facility rather than two.”

However, there is a caveat. NcKee warns: "Finding a way to do that without giving away commercially sensitive information is always difficult."

Distribution is one channel where pooling resources is increasingly common. IGD is a research and education charity working in the food and grocery industry. It hosts its own “speed dating” events where companies swap delivery routes and share fleet.

“One in four vehicles returns from its destination empty,” says Tarun Patel, head of supply chain at IGD. "We thought that was a huge waste of resource." Patel says that joint arrangements brokered through the charity have saved firms 53 million miles. To read the whole article, click here.

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