Lessons 2014: Collaborate and Conquer

Last year, major companies decided that what they couldn't do well themselves they were better off doing together. A look at some of 2014's biggest partnerships and what you can learn from them.

Written by Canadian Business Staff

As you gear up to take on the challenges and opportunities of the new year, it’s worth taking a moment to reflect on what happened in the last one. As the sluggish recovery of the Canadian economy continued in 2014, many companies looked up, down, or sideways for ways to boost revenues and excite customers.

Canadian corporations have been particularly aggressive in the mergers and acquisition space in recent years, and last year saw a fair number of big deals. But companies also opted for temporary alignments and marriages of convenience. Here are a few lessons in collaboration from 2014, and one example where saying “no thanks” proved to be a better idea than “yes please.”

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What you can’t do yourself… (Part One)€‹

Tim Hortons’ first marriage in 1995 started with such promise. The deal that saw Wendy’s International operator purchase Tim Hortons, was meant to raise the donut shack’s profile outside Canada, but it never lived up to its promise. Now Tim Hortons hopes its new spouse will deliver. The goal of the union between Tim Hortons and Burger King isn’t all that different from the Wendy’s deal: the promise of an international presence and the chance to leverage menu items across the two chains. The key difference this time around is that the driver of the $12.5-billion deal is Brazilian private-equity fund 3G Capital, which has a reputation for being a strong, cost-efficient operator. With 3G as a partner, there is more confidence in Tim Hortons finally pushing aggressively into the U.S.

And it’s a pivotal time for the doughnut shop: Having already saturated the Canadian market, the company needs to find growth, which it has failed to do on its own.

MORE MERGER: The potential pitfall of a Tim Hortons-Burger King merger »

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What you can’t do yourself…(Part Two)

Photo: Murad Hemmadi

Two blockbuster Canadian media brands came together in October, but at first glance, the content partnership between Vice Media and Rogers Communications might seem something of an odd fit. Vice’s irreverent brand is heavy on anti-establishmentarianism. Rogers (which owns this magazine) is part of the bedrock of the Canadian business establishment. Vice has built a billion-dollar business online. Rogers controls the airwaves, but still has billions invested in legacy infrastructure. Vice captivates a global audience of millennials. Rogers has identified that demographic as key to future growth. And that’s why this deal makes sense for both sides: CEO Shane Smith gets a capital investment and production facilities for a 24-hour Vice channel; CEO Guy Laurence gets dynamic content for Rogers and the creative glow of one of the world’s coolest brands. Each company leverages the other’s strengths. It’s a $100-million bet on working together.

MORE VICE: How to Inspire Cultish Employee Devotion »

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Don’t guard the brand too carefully

Photo: Warner Bros. Pictures

The Lego Movie was a 100-minute toy commercial with a fiendishly catchy theme song that cost viewers $12 to watch when it came out last February. What was less obvious was how much of a gamble Lego had taken in hiring the cult duo behind the 21 Jump Street reboot to write and direct the film. “It has to feel like it came from outside your company,” screenwriter Christopher Miller told an interviewer at the time. In September, the Danish toy maker—and scourge of barefoot parents everywhere—announced that the film helped boost the company’s revenues by 11% and profits by 14% for the first half of 2014—enough to make Lego the biggest toy manufacturer in the world by revenue (it was already the most profitable). No wonder they’re fast-tracking a Lego Batman spin­off for 2017.

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Failure to wed is easier than divorce

Critics panned May’s Omnicom and Publicis merger from the start. While the bold $24-billion deal between ad firms would have made executives a pile of money, those in the industry said it was lacking in one important trait: logic. It took four months and $100 million in fees for executives to realize the deal was dead in the water, with both sides describing it as an “opportunity” not a “necessity.” Perhaps this tweet from RG/A, a small ad agency, sums up the whole debacle best: “Omnicom rolls over, blinks, stares perplexedly into the sleeping face of Publicis, thinks: My head! Where am I? I remember champagne….”

MORE FAILED MERGERS: The Smart Way to Prepare for a Merger »

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This article is from the January 2015 issue of Canadian BusinessSubscribe now!

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