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IAI Actuarial Core Principles · Business Finance · Corporate growth, restructuring and divestment

Which statement about joint ventures and strategic alliances as growth routes is most accurate?

Joint ventures and strategic alliances let firms share risk, costs and expertise and access new markets without a full merger. Control is shared rather than complete, ownership of the partner is not acquired, and profit sharing is normally set out in an agreement.

  1. AThey allow firms to share risk and access partner expertise without a full mergerCorrect
  2. BThey always give each partner complete control over the venture
  3. CThey are a form of divestment of the entire business
  4. DThey require the acquiring firm to buy 100% of the partner's shares
  5. They eliminate the need for any agreement on profit sharing

Explanation

Joint ventures and alliances pool resources and share risk and expertise, while the partners remain separate entities. Control is shared, not complete, and profit sharing is normally agreed in a contract. They do not require full share purchase.

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