Question

A candy company called SweetThings Inc. forms an agreement with another candy company called Reverie Inc. Through this agreement, SweetThings owns 30 percent of Reverie. However, Reverie does not own any part of SweetThings. This type of agreement is called a(n)

1) Joint venture
2) Merger
3) Acquisition
4) Strategic alliance

Answer 1

The agreement between SweetThings Inc. and Reverie Inc., where SweetThings owns a stake in Reverie without any reciprocal ownership, constitutes a strategic alliance and not a joint venture, merger, or acquisition.

Step-by-step explanation:

When SweetThings Inc. owns 30 percent of Reverie Inc., and Reverie Inc. does not own any part of SweetThings Inc., such an agreement is called a strategic alliance. This is not considered a joint venture because they have not formed a new entity, nor is it a merger or an acquisition, since the companies have not combined into a single firm or one has not been purchased by the other.

A strategic alliance can be described as a formal arrangement between two companies to pursue a set of agreed upon objectives while remaining independent organizations. The type of agreement described, where one company owns a percentage of another company without the second company owning any part of the first company, is called a strategic alliance.