The risks of establishing an alliance with a former divestment.

Last week AkzoNobel announced to have established an alliance with Corn Products International/National Starch. Through this alliance AkzoNobel will act as the global distributor of Corn Products’ line of functional, modified starches for hair care and skin care applications. The agreement is a multi-year agreement that, according to the announcement, will allow both organizations the ability to grow their product portfolios.

The alliance can be characterized as a channel alliance. AkzoNobel Global Personal Care will be the channel to bring the products of Corn Products International/National Starch to the market.  With that AkzoNobel will have access to a broader product portfolio that will help achieve its growth ambitions across the three strategic pillars of hair styling, skin care and cleansing/conditioning. On the other hand the alliance will provide Corn Products with access to a larger market.

At first sight a regular channel alliance, however digging a bit deeper shows some historical bonds between the two partners. The National Starch division has been acquired by Corn Products in 2010 from AkzoNobel. In 2008 AkzoNobel had taken over ICI where National Starch was part of, however AkzoNobel did not consider National Starch to be part of their core business and hence divested this division to Corn Products International. Still National Starch had products in their portfolio that would benefit the Personal Care division of AkzoNobel and these come now available through the alliance.

There may be some benefits in establishing an alliance with a former colleague. Culture wise one may expect that there is a fit. After all the companies used to have a similar culture, which may make working together easier. There can however also be culture risks connected to a former divestment as alliance partner. Divestments may have led to unhappy employees who will not be as cooperative as they should be or the culture may have changed over time to the culture of the new organization that my not necessarily be compatible enough for an alliance.

A “we know these guys” mentality may play a role in the partner selection phase and hence a potential alliance with a former colleague should not be taken lightly. It may even need to undergo a more rigorous selection to ensure that the two companies still fit together. After launch the alliance manager needs to keep a sharp eye on cultural perspectives and manage accordingly when hiccups may arise. Historical bonds may make a partnership fly or die.