Monday, March 12, 2012
Nicholas Center Blog
The first-year Corporate Finance & Investment Banking class welcomed board member Don Condon from Westlake Chemical to a recent Current Topics class. Always gracious with his time in supporting the Nicholas Center, Mr. Condon used this opportunity to take the class through the intricacies of joint ventures and alliances within a corporate setting. This wasn’t your typical textbook tutorial either. Mr. Condon applied his discussion to his extensive first-hand knowledge of these complex business partnerships, walking students through examples of JVs and alliances from his impressive career.
As was explained to the class, these partnership arrangements between two or more organizations are used quite frequently. Companies work together for many reasons, including to gain access to new markets, acquire new technologies, access capital, or to divest a non-core business, among many others. Joint ventures and alliances also come with the additional financial benefits of being able to share the project costs and in some cases avoid paying large acquisition premiums that would have been otherwise necessary to gain the advantage offered through the partnership. All of this goes a long way to reducing the negative impact to shareholders.
Like anything else, these advantages don’t come without their problems. Mr. Condon used a few examples to illustrate the headaches that come with sharing control of a project or division with another company, aligning two organizations objectives, the loss of confidentiality and a dilution of a company’s competitive position by partnering with an industry rival. Furthermore, the importance of having a solid and well thought out exit strategy was emphasized throughout the presentation. Sometimes, these partnerships end in messy, painful breakups, and if a plan hasn’t been put into place on how to terminate the joint venture, it can lead to numerous time-consuming and expensive problems.
Mr. Condon applied all of this information directly to examples of various joint ventures from his own career. From a Dupont and Dow joint venture to produce a profitable non-core product to a JV with Mexican and Brazilian ammunition manufacturers while working for Remington Arms to another JV while at Dupont that allowed for the transfer of a proprietary technology to a company positioned to fully take advantage of it, he shared many great examples of joint ventures that worked and some that didn’t work out as well. His experiences went a long way in helping everyone think about the problem-solving and thought processes that go into a complex business strategy like a joint venture.
It proved to be an interesting discussion that had the class interested and involved throughout. Joint ventures and alliances can be great business tools for companies to use for a wide variety of reasons, but they don’t come without their challenges. To have someone like Mr. Condon with such a diverse and intimate knowledge of the topic made for a unique learning opportunity.
On behalf of the CFIB Class of 2013, I would like to extend my thanks to Mr. Condon for sharing his expertise with us. It is always great to have him in the center, and we all truly are appreciative of the efforts that he so willingly makes to enhance our learning experience in the program. On, Wisconsin!