Business alliances are vehicles for implementing business strategies and can be informal agreements or highly complex legal structures. As is true for mergers and acquisitions, a business plan should always precede concerns about how the transaction should be structured. Business alliances are the various forms of cooperative relationships including joint ventures, partnerships, strategic alliances, equity partnerships, licensing agreements, and franchise alliances. The motivation for an alliance can include risk sharing (proprietary knowledge, management skills, resources), gaining access to new markets (using another firm`s distribution channels), accelerating new product introduction, technology sharing, globalization (access to foreign markets), cost reduction (purchaser/supplier relationships, joint manufacturing), a desire to acquire or exit a business, and the perception that they are often more acceptable to regulators than mergers and acquisitions (collaborative research shared with others).
In contrast, the different motivations for mergers and acquisitions are operating synergy (economies of scale/scope) and financial synergy (diversification, strategic realignment, ego/hubris, buying undervalued/mismanaged companies, managerialism, tax considerations, increasing market share) but also certain contributing factors has to prevail at the same time. For example, firms are more involved in M&A activity when they react to shocks mostly resulting from the emergence of a new technology or product or changes in regulation, restrictions on takeovers so the legal environment or rise in commodity prices.
The reasons why corporations choose to sell a business includes increasing corporate focus/de-conglomeration (simplifying business portfolio), a desire to exit underperforming & no longer considered strategic business, a lack of fit, moving away from the core business, raise funds, reduce risk, avoid conflict with customers, increase financial transparency, assets are worth more to the buyer than to the seller, regulatory concerns (violation of antitrust law), correcting past mistakes, discarding unwanted business from prior acquisitions and tax considerations.
The decision when to sell should follow the following steps: estimating unit’s after-tax cash flows viewed on a standalone basis, carefully considering dependencies with other operating divisions, determining appropriate discount rate, calculating the unit’s PV to estimate market value, calculating the equity value of the unit as part of the parent by deducting the market value of liabilities. The last step is deciding to sell or retain the division by comparing the market value of the division minus its operating liabilities with the after-tax proceeds from the sale of the division.

Explain how executing successfully a large-scale divestiture can be highly complex. This is especially true when the divested unit is integrated with the parent’s functional departments and with other units operated by the parent. Consider the challenges of interdependencies, regulatory requirements, and customer and employee perceptions.
Divestiture is the sale of a portion of a firm`s assets to an outside party and often represent a way of raising cash by selling undervalued or underperforming, nonstrategic or nonrelated operations and returning the cash to shareholders through either a liquidating dividend or share repurchase. In these cases shareholders