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July 2017
Forming strategic partnerships: comprehensive evaluation of potential partner companies

Many of the companies with which we have worked have started to think about finding a
partner at some stage in their development, for example, to outsource some business
functions, to diversify, to grow sales or to vertically integrate their main line of business.
Regardless of the partnership’s goals, the process of finding the most attractive companies
for negotiations is as follows:
• compile a long list of companies;
• determine the goals and parameters for evaluating partner companies;
• narrow the potential partners down to a short list;
• establish relations with the companies and conduct negotiations to work out the details of an agreement.

The partnership’s results directly depend on the speed and quality with which each of these
stages is implemented (did all relevant companies make the long list, were they evaluated
objectively, were the negotiations successful and were the original goals of the partnership
achieved).
To determine the goals and evaluation parameters for partner companies, our consultants
prepared in advance and coordinated with the client company a set of characteristics that
helped to evaluate: a) the level of corporate governance of companies on the list; b) whether
their expertise and skills were complementary for the customer.
After the evaluation characteristics were approved, our consultants described the target
vision of the partner company. Figure 1 shows an example of a description of such a
company.

Figure 1.
For a comprehensive evaluation of potential partner companies, metrics in 5 areas need to be analyzed
slide1_eng

First, three parameters were formed to act as indicators of the level of corporate governance:
business size, management quality, and strategic growth priorities.
Second, our consultants developed two other parameters that were unique to this project,
based on the expertise and skills that each side could bring to the partnership. In our example,
the customer was prepared to provide access to financing and was seeking exponential
revenue growth via vertical integration of its main line of business. Consequently, the
customer was seeking either companies that did business in adjacent stages of the value
chain, or vertically integrated companies in need of additional financing.

Figure 2 shows the comparison approach for the long list of companies. In our example, the
target partnership option envisaged small business size, high transparency and
manageability, limited financing opportunities and a high degree of vertical integration.
MCG’s consultants placed all the companies from the long list on a comparison map to justify
the selection of short list partner candidates for further analysis.

Figure 2.
Comparison of potential partner companies
slide2_eng

We recommend using this tool to identify unique partnership parameters, visualize the target
option of a partner company, and form a short list of potential partners.

Authors
Dmitry Plotnikov
Dmitry
Plotnikov
Galina Kan
Galina
Kan
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