Negotiating Joint Venture Agreements

RARELY A DAY PASSES without a new joint venture being announced in the world`s leading financial publications. Last year, Apple, Bank of China, Google, ExxonMobil, IBM, Microsoft, NestlĂ©, Novartis, Samsung, Sinopec, Tesla, Toyota and many other leading companies created at least one new joint venture – and in some cases several. The continued volume of activity is not surprising, as joint ventures allow companies to access skills, access new or restricted markets, share equity risks, pool capital and ensure sectoral and sectoral synergies. But the great advantage of joint ventures – the freedom to creatively combine the contributions of two or more players – makes these agreements inherently difficult to negotiate and structure in relation to, for example, acquisitions or licensing agreements. The inherent flexibility of joint ventures requires dealmakers to make design decisions in several dimensions, including asset and value chain, business model, exclusivity, contributions, property, branding, intellectual property rights, governance, financial agreements, management and personnel, and exit. It can be a demanding task. Below, we propose a five-part checklist, which allows us to put pressure on the new concepts of joint venture and to negotiate and structure the legal agreements of the joint venture. We also provide some advice on how to ensure that the joint venture negotiation process results in either a “quick no” or a positive “yes.” Negotiators who understand a partner`s motivation, needs and skills will be in a better position to establish a strong and honest relationship with common and explicit expectations. Extensive research can highlight things that might not necessarily appear during the negotiations, but could influence the partner`s participation in the joint venture. For example, an energy company avoided a possible misstep after studying a partner company`s relationship with distributors before investing in a local production plant. This analysis showed that the CEO of the partner company intended to use his own distribution company to exclusively direct products to a lucrative distribution area. After the energy group intensified its concerns, its partner nevertheless sued the company, but did not use the CEO`s distribution company. Given that so many companies plan to expand their joint ventures in the coming years, it is worth investing time in negotiation and planning to ensure the value of these projects.

In the rapidly changing world of deal-making, joint ventures (JVs) add up. Slowly in manufacturing, often with complicated structures and shared management teams, they seem in a volatile era, marked by slogans, agility and agile strategic movements. But there are more than 1,500 joint ventures that have been concluded each year over the past decade, about 10 per cent of which are classified as large joint ventures with an initial value of more than $250 million. Their volume is expected to continue – more than two-thirds of executives surveyed in 2014 said they expect more JV in the future.1.Eileen Kelly Rinaudo and Robert Uhlaner, “Joint Ventures on the rise,” McKinsey on Finance, November 2014. This McKinsey Global Survey was in this area from March 11 to March 21, 2014 and received 1,263 responses from C-levels and executives representing the full range of regions, sectors, business sizes and functional specialties. Of these, 982 executives have personal experience in managing or managing joint ventures. However, our survey of JV practitioners showed that less than a quarter of them have a joint enterprise design and implementation playbook – the kind of simple tool that most companies using D-MS programs have for years to reduce the burden on the internal team and facilitate discussions with potential partners.

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