As high-tech companies wrestle with the coming wave of restructuring, executives should consider the full range of deal options: not just mergers and acquisitions but also alliances and joint ventures. In some cases—when companies are unwilling to sell or acquisition premiums are too high—alliances are the next best thing to a merger. In other cases, they are actually preferable to M&A. Experience from a range of sectors shows that high-tech CEOs and CFOs should consider several types of transformational alliances.

First, when parent companies want to stay involved in a business but need to gain scale to compete, they may unite business units into a joint venture; Sony and Ericsson, for example, combined their mobile-handset units to take on Nokia and Motorola. (Other examples include Spansion, which combines the flash memory businesses of AMD and Fujitsu, and Renesas Technology, the $8 billion combination of Hitachi’s and Mitsubishi Electric’s semiconductor operations.) Joint ventures face many of the same integration challenges found in large-scale mergers, and the partners must cope with the added problems of shared ownership. Nonetheless, joint ventures can generate synergies equal to 50 to 75 percent of the value of the contributed businesses, both through increased revenues from...