International Trade/Offshore Manufacturing/Sourcing/Export/Import/Consulting Engineering a European Partnership By Michal Gilzenrat Armed with research, savvy personnel and the necessary investment capital, a company can head overseas and launch its own operation in Europe, foregoing a partnership for the sake of additional profits and control. But for many companies, there is a better route. A local partner firm can help you understand foreign regulations, codes, authorities and conditions, not to mention give you the inside scoop on tricky cultural considerations. Such knowledge is particularly critical for complex operations such as an engineering venture. Also note that even if you are comfortable without a partner, U.S. clients that might hire you overseas will often insist that you have a local partner. So, you need a partner. Which leaves several critical questions: What do you look for in a partner? How do you find and analyze the candidates? What form does the partnership take? What are the cultural issues? Will you get married? (More on that last one a little later.) Look for a firm with expertise that complements your own services. Do they have strengths to address your cross-border weaknesses? If you are in search of a partner for a specific project, can they accomplish everything that needs to be done? This may sound fundamental, but many promising partnerships have failed because such obvious requirements were overlooked. It's a good idea to find a partner that is as dependent on you as you are on them. That helps assure teamwork and protects your interests - you don't want them taking over the project once you've opened the door. You want a mutual tie, a common denominator and common goals. One way to address this is to ask what the partner sees as their key benefit of working with you. Some European companies are on the lookout for partnerships with American companies so they can build their own intercontinental bridges to new business. Others might be looking to grow locally through marketing an association with a U.S. firm. Such long-term goals are good indicators that the firm is serious about partnership. If your company already has an operation in Europe but is not in the specific region in which you need a partner, that operation should be the first place you inquire. They might know of potential partner firms, or unbeknownst to you, they may already have an informal relationship with a firm. Try inquiring with your international clients. Maybe they're using you in the U.S. but another firm in Europe. If so, striking up a relationship with that firm could strengthen this client relationship, as well as open the doors for new clients. Another source is vendors with overseas operations. If you are a valued client, they will have a vested interest in helping you. Have you lost previous competitions in Europe to local firms, perhaps on a pitch with a tentative partner that backed out once the bid was lost? If a firm beat you (and doesn't already have a U.S. partner), you know they have strengths to offer. Barring such connections, there is always the local chamber or trade association. You will find many of them are represented in the U.S. through the major trade groups. That is a good reason to participate in and attend trade functions. Analyzing the Candidates Once you've narrowed your options to two or three companies, check them out in person. Meet with the principals. They will look to impress you with their capabilities and reputation, but you should already know most of that through your research. Check their backlog of work, the projects they've completed, and the value they added. Most importantly, get a solid read on the chemistry. It may be against your nature to make a business decision based on a gut feeling, but chemistry is the most important factor in any partnership. A good test-run is to start out small, narrowing the partnership scope to one specific project with a written contract that spells out the details, responsibilities, financials and time frame. Include in the contract a post-op analysis from both sides and assess the partnership's future from there. If the partnership works and you want to build a presence in the market, consider a "documented formal alliance." That means you form a partnership for as-yet-unidentified projects, then advertise the alliance to both parties' clients and to potential customers. Announce you are going to jointly pursue and execute projects of a certain kind in a certain market, such as the pharmaceutical market in Eastern Europe. The golden rule: don't assume anything. If you do, sooner or later you will run into problems. For example, companies will have different reporting techniques. It is important to agree with your partner on what activities they need to report to you, as well as in what form and with what frequency. Some partners may bombard you with accounting documents you don't need, though they may be important in their country according to its laws and regulations. Other partners won't send you enough. Let them know what you need and don't need or you will waste time and money. Also, establish a clear understanding in regard to answering proposals. You might prepare a detailed presentation outlining the scope of work, deliverables, etc. Your partner, on the other hand, might have in mind a two-page letter. Head this potential problem off at the pass by following the old adage: do as the Romans do. Depend on what your European partner tells you about the best way to present yourself on their turf. On the other hand, if it's an American company you're pitching to, the partner should listen to you. A European partner might perceive you as different than what they are accustomed to. In Lockwood Greene's experience, American companies typically listen to the customer more, are more flexible, are more customer-oriented, and more focused on the long-term relationship. Some European companies will tell a customer, "We know how to do your project, and this is how we're going to do it. We've done this for 50 years." That attitude is slowly changing, but it still lingers. Getting Married Whether it's over the course of several projects or several years, at some point a successful partnership will evolve into something more. At the outset, you are "dating" Ð a project partnership. If the relationship is serious and successful, eventually you "get engaged" Ð a formal alliance. The final step is "getting married" - an acquisition. Fortunately, marriage of this type can be taken in steps: initially you may acquire a small share; later you may acquire a controlling interest. It is wise to keep this likelihood in mind from the outset, depending on your long-term goals for the market. If acquiring your partner is a possibility, look for a firm that is smaller than you. Also, ask how they see their future; the answer may give you insight into the feasibility of such a scenario, or it might give you reason to pause. As in a true marriage, it is good to know your partner's goals before heading down the aisle. When this article was first published, Michal Gilzenrat was vice president of European operations for Lockwood Greene International, a Spartanburg, S.C.-based consulting, design and construction firm serving the industrial and process industries worldwide. Advertise on this site Put your company on this site!