Structuring Joint Risks
In the fast-paced deal-making world, joint ventures (JVs) are a conundrum. Slow in the making, often with complicated structures and shared management teams, they seem out of place in a volatile era with buzzwords that hype agility and nimble strategic moves.
Yet, there they are, more than 1,500 JV deals completed annually over the last10 years, including around10% of them characterised as large ones, with an initial value of more than $250 million. Their volume seems likely to endure: more than two-thirds of executives surveyed in 2014 reported that they expect to do more JVs in the future.
But JVs are not always embraced without reservation. In fact, we encounter many executives who express significant concerns, often when they are wrapped up in the uncertainty of JV negotiations. Given how much longer those negotiations can last compared to traditional buys, this is both understandable and alarming. One global conglomerate we’ve observed advises its USbased headquarters to expect JV talks to last 3-6 times longer than M&A negotiations.…
How can healthier partner relationships be built to give future JVs the best odds of success? Our review of long-standing partnerships identified three principles that made a difference: investing more time and effort up front, working harder to cultivate and sustain the JV relationship, and standardising key processes and learning mechanisms.
From “Negotiating a better joint venture”