Out-Law Analysis 4 min. read
22 Jun 2023, 11:26 am
Collaboration between brands can be a powerful means of value creation.
Businesses have achieved huge financial and reputational success through well-chosen strategic partnerships, but selecting the right partner requires close consideration of the aims, structure and documentation of any potential collaboration.
Some of the most successful and impactful partnerships come from businesses pursuing similar goals and strategic aims, combined with a genuine desire to support each other. This notion that ‘purpose drives value’ is easiest to see when looking at partnerships between businesses that operate in differing markets, but where there is some peripheral alignment.
For example, two brands might target the same customer demographic, offering different, but complementary, products. In that scenario, the purpose of collaborating might be to increase each business’ market share and profile.
Partnerships might also be selected based on shared values. This is often the case with brands that champion sustainability or diversity, where brands leverage their respective businesses and market reach to promote a specific social agenda or initiative. In each case, there is a clear focus on capitalising on these relationships for mutual benefit.
Cross-industry partnerships can strengthen brand awareness and increase exposure to new audiences, resulting in an uptick in customer acquisition. There is a growing trend towards a multi-channel approach to customer engagement, with brands collaborating with platforms like TikTok and YouTube to reach new demographics.
For example, earlier this year, Disney teamed up with luxury sneaker retailer, Kick Game, to promote the release of the 20th Century Studios remake of White Men Can’t Jump with a screening event hosted by Craig Mitch, the presenter of Kick Game’s ‘Sneaker Shopping’ YouTube series.
Brands can maximise the impact of these partnerships by identifying innovative strategies to deliver ‘industry firsts’ and disrupt the status quo. This can have invaluable benefits in positioning the brand as a pioneer in driving cultural change in the industry. British womenswear label The Fold identified a lack of sponsorship in women’s football and announced its status as Official Formalwear Partner for Manchester City Women’s team to provide high-end ‘formalwear’ to support the players with feeling confident and empowered during their off-pitch appearances.
While women’s workwear and women’s football do not necessarily present an obvious partnership, besides the obvious need for quality tailoring that celebrates athleticism, the two brands also share an ambition to elevate women, champion ambition and spotlight women’s achievements.
There are several considerations for finding the right partner that are also important to bear in mind when negotiating the terms of the partnership. Brands should consider the aim of the partnership and their individual priorities. Is the partnership purely a method to maximise profits? Is it important to retain control of the work generated by the partnership?
An ‘ambassador’ or ‘influencer’ arrangement might be appropriate for some brands, in which an influencer posts advertisements or provides affiliated links to specific products and companies on their social media accounts. This arrangement allows brands to directly link the value generated by the collaboration to the person promoting it, by tracking where a specific promotion by a collaborator leads directly to a purchase. Businesses can take this into account when negotiating the payment terms for these arrangements, by incorporating a more commission-based payment structure so the influencer only receives payment for their contribution to the growth of the business.
If brands settle on the idea of a joint venture, they will need to clarify how the partnership will be structured. Will a 50:50 split work for both or is one party planning to contribute more to the partnership? Are both parties contributing the same thing, such as upfront capital, knowledge, or customer data? What do both parties want to get out of the partnership? Are these objectives aligned?
Whatever form the collaboration takes, it is important to ensure that the purpose and key interests in the partnership are effectively documented. There is much to consider, including:
Brands need to ensure that both sides retain ownership of their own IP, even where it is used for the benefit of the partnership. Where set rules around ownership of ‘work product’ are required, such as designs, image rights and social media content, that is generated by the parties over the course of the partnership, a greater focus will be required in the legal documentation on the IP provisions and licensing arrangements.
Before agreeing to give away equity, businesses should consider what happens if their new partner falls into disrepute or breaches the terms of the agreement. Any possibility of taking or buying shares back must be negotiated at the outset and documented accordingly.
To reap the benefits of collaboration in full, the terms must be crystal clear and drafted in a way that promotes the success of the partnership while preserving each party’s interests. When done correctly, collaboration between brands can deliver phenomenal mutual benefits from a financial perspective, and can also have lasting positive impact on the brand’s reputation, building a strong foundation for the continued growth of both brands.
Co-written by Samantha Treleaven and Damini Kotecha of Pinsent Masons.
24 Sep 2020