United Kingdom

Details

  • Service: Advisory
  • Type: Video
  • Date: 05/06/2013
  • Length: 2:17 Minutes

Emerging economy JVs - setting up for success 

text version:

 

Emerging economy JVs – setting up for success

 

If large firms, whether they are oil and gas, or industrial, or any other sector, want to get access to emerging economies, if they want to hang on to the business they have, they must be effective in the joint venture space.

 

I firmly believe that even some of the largest firms in the world, are equipped to deal with joint ventures as they were, ten or twenty years ago, but really struggle to be effective in the joint venture space as it is today – particularly in the emerging economies.

 

Joint ventures are a dangerous space. They are a space that you should not enter upon lightly. When going into a joint venture, one of the more dangerous things is to announce it to market as a great triumph at the moment of signing a joint venture agreement. In our experience you begin to find out whether a joint venture is viable, and will deliver value, two or three years into the joint venture.

 

In the majority of cases joint ventures suffer from issues and degrade. They degrade in relationship, they degrade in the overall value they deliver to the original investor. A good joint venture has the same issues but very successfully captures those issues, builds on them and strengthens the relationships as they move forward.

 

I believe that joint ventures should be operationalised thoroughly and professionally, rather than be left to chance, as they often are. It’s very easy to convince yourself that the deal is real. Most of the parties that we work with are heavily incentivised to do the deal, to transact the joint venture, and that leads to a degree of optimism-bias as to the actual implementability. So let’s health-check it, let’s check whether it can work in practice, let’s contingency plan and let’s operationalise it correctly – and then you’re off to a good start.

 

To gain access to emerging economies, it is essential for companies to be effective in the joint ventures space.  Many – even the largest – struggle to manage their JVs as live and dynamic business entities that are sensitive to cultural differences.  Failing to do so, can quickly lead to value erosion.

 

In this short video, Dr Marc van Grondelle, Head of KPMG’s Global Joint Venture Practice, explores some of the challenges and how to tackle them.

 

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Dr Marc Van GrondelleDr Marc van Grondelle

Head of the Global Joint Ventures Practice

+44 20 7694 4603

Email Marc