At Woodbury Hodge we are sometimes asked to get involved in designing and implementing alliancing structures.
An alliance is essentially a form of contractual (ie unincorporated) joint venture for a particular purpose. The ideal is that each participant contributes effort to the best of its ability and that everyone is incentivised to subordinate their own narrow business interests to the good of the project. Unanimous decision making is often required, in our view rightly. This requires a seemingly unlikely combination of passion (for the project) and discipline (for the sublimation of self-interest) and this can be hard to pull off. The spirit is often willing but the flesh is sometimes weak !
Traditionally, alliances have been used for complex one off tasks such as construction projects. Increasingly, they are being looked at and used for public service delivery. For example, in the NHS the Sustainability and Transformation Plan process that each locality has to produce will often advocate a close alignment between the various providers in the area in order to integrate service delivery, eliminate waste and improve patient experience. It’s easy to be cynical about this. We all know that the NHS lacks money and that combining management structures and realising economies of scale may, on a good day, save money. We also know that experience of the 2012/13 structural reforms means that more overt takeovers and mergers aren’t politically acceptable. So alliances (under many and various names) look like an attractive way of achieving the same aim. So what’s not to like ?
There is a sting in the tail however, and it is this. Making an alliance successful requires a radically different mindset from “ordinary” mergers and acquisitions. The balance between preserving the autonomy of the individual participants and achieving common purpose is extraordinarily delicate. It is also very hard to achieve by using “traditional” commercial approaches which, for all the talk about “win:win” revert to “win:lose” under pressure. In our view the key to this is ensuring that the need for unanimous decision making is at the forefront of everyone’s minds from the outset. Sure there has to be a way of resolving deadlock and excluding saboteurs, but that probably has to be on a “lose:lose” basis to concentrate minds on the price of taking an acquisitive approach.