Strategic advice Using strategic partnerships to boost business growth

If you’re thinking about how a strategic partnership could benefit you, here are some considerations your Truist relationship manager can help you navigate.

Weighing a partnership versus an acquisition

Some benefits of strategic partnerships—such as accessing new markets and customer segments—could also be gained through an acquisition. But Terrell says for many companies, the drawbacks may outweigh the positives.

“Acquisitions give you full control, but they also require significantly more capital and carry more risk,” says Terrell. “Partnerships take some time to develop an operating agreement that works for both parties, but you’ll ultimately reach your goals faster, with less balance sheet disruption or capital outlay.”

Choosing the right type of partnership

Partnership structures can vary based on each party’s level of control in the agreement. Types of partnerships can include:

• Joint ventures, where two companies create a new legal entity with shared profits
• Equity alliances, where two companies purchase shares from each other
• Non-equity partnerships, where two companies share resources to launch a new project while both remain independent

While your legal team will cement the final agreement, your Truist relationship manager can help determine the structure that works best for you.

“We assemble a group of advisors to identify the risks and opportunities of each type of partnership and then build out an agreement that appropriately defines each party’s equity stake,” says Terrell.

Forecasting and capital structure

Sharing resources or buying and selling equity shares as part of a partnership can affect your company’s capital structure. “Partnerships may not require the same capital outlay as an acquisition, but they still impact cash flow and liabilities, which ultimately impact your credit profile,” says Terrell.

That may mean examining your balance sheet risk and forecasted cash flow to find the optimal capital structure. Truist helps clients do that by developing what Terrell calls a “day one.”

“A ‘day one’ identifies what the financial profile of the company will look like on day one of the partnership,” says Terrell. “Using that as a starting point, we can provide scenario planning to help clients see how a partnership might play out for them financially and help them structure the agreement, so it complements their long-term strategy.” 

Finding the right partner

To ensure your partnership clicks, you’ll want to find a collaborator with complementary resources, capabilities, and expertise to fill any gaps keeping you from meeting your growth goals. You’ll also want to look for shared values and cultural alignment, along with financial stability and market position.

If you don’t have a target partner already in mind, Terrell says your Truist relationship manager’s local and industry connections could open up a range of possibilities.

“At Truist, we can leverage our network of connections, including clients in complementary industries and locations, to help you find the right partner,” says Terrell. “It’s all about unlocking the power of our network to connect clients with companies we know may be looking for additional collaborative opportunities.”

The insights Truist can offer around strategic partnerships are just one reason Terrell encourages business leaders to access their bankers less as lenders and more as strategic advisors.

“Maintaining an open dialogue, where we get to know your business and what you’re trying to accomplish, is how we unlock the true value of the client-banker relationship,” says Terrell.