Describe an equity alliance with the help of an example.
What will be an ideal response?
Student examples will vary. A sample answer follows.
In an equity alliance, at least one partner takes partial ownership in the other partner. Equity alliances are less common than contractual, non-equity alliances because they often require larger investments. Because they are based on partial ownership rather than contracts, equity alliances are used to signal stronger commitments.
One example of an equity alliance is the Renault-Nissan alliance. The Renault-Nissan alliance is based on cross equity holdings, with Renault owning 44.4 percent in Nissan and Nissan owning 15 percent in Renault.
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