United Kingdom

Protecting and sustaining a Joint Venture 

 Joint ventures  Joint ventures and alliances can bring diverse and often unfamiliar governance and assurance challenges. The stakes are high, with increasing regulatory and compliance scrutiny. Our dedicated team brings specific insight and experience, aimed at helping clients’ internal assurance, risk and operational teams identify and tackle JV-related risks.

Who’d be an Audit Committee Chairman these days?

There is an increasing contribution from alliances and JVs to UK Plcs’ turnover and EBIT. Yet the latest pronouncement from McKinsey still claims around 60% of these fail or fail to deliver. How many of today’s Audit Committee Chairmen and Non-Executive Directors have hands on experience of managing such ventures in far flung emerging markets? How confident do they feel to challenge those who reassure them that the risks are under control? To read more click on JVs a Double Whammy?(PDF 1.2MB) under Related Publications on this page.

Recent projects and insights

Foreseeing the devilish detail of good alliance planning

Our clients are more used to competing with each other for contracts than to collaborating. As an initial step towards their new alliance, we ran a workshop on the pitfalls and practicalities of transitioning to this new co-working environment. From an inconsistent picture of the three year goal to questions about “who does what” and differing definitions of “profit”, it soon became clear that there was a lot of detailed knowledge sharing and operational planning to be done. By headlining key risks early and in a very practical context, we helped our client to size its challenge and develop a practical road map of tasks to manage over the coming weeks towards completion.

Governance ”health checks” maintain momentum

Clients often tell us that “governance isn’t working” in a JV. Often this seems to mean that they can’t agree on the way forward. For example, many ventures which achieve their expected “early wins” and efficiency gains then begin to lose momentum, and struggle to kick-start the growth and innovation stage. We often facilitate a joint challenge process for the partners pre-signature, to test how closely their goals for and understanding of the JV are aligned. Almost invariably, this exercise is seen as a “one off”, almost part of the due diligence process. In our view a similar “health check” should be built in at intervals through the life of the JV. If agreed upfront, this enables partners, for example, to raise operational or performance issues in a “safe”, non-tendentious setting, to formally reconfirm the direction and goals of the JV and to agree any governance changes required to support a revised or next stage business plan.

 

  • Read more on JV governance challenges for UK Plc (PDF 43 KB)

 

Non-equity structures - simpler or riskier?

We see a growing trend towards non-equity structures in the joint venture world. Some see this as a swifter, less costly way to experiment. Others simply wish to avoid complex accounting standards. Sometimes, notably when ventures involve intellectual property, such arrangements have led to lengthy, expensive disputes and/or damage. By contrast, sometimes a focus on structure leads to a missed opportunity to build strong working relationships first via an initial, less formal but well thought through collaboration. As with all alliances and joint ventures, there simply is no “one size fits all” best solution.

Information is a dangerous thing

 

Traditionally, JV agreements are predicated on an “open book” relationship between partners - sharing everything required to run the operation successfully. However, the dynamics of JVs are changing – new entrants, more diverse investors, more ambitious and assertive host governments.  The potential value of information access and assets (IT, know-how, training materials, blueprints, policies, pricing agreements, etc) is huge.  To derive benefit from and protect this value, companies entering JVs need to be clear-sighted and well-prepared. Appropriate cataloguing and categorisation, with robust protection and detection mechanisms, both physical and technological, is essential, backed up by clear consequences of breach spelled out in the JV agreement.  Getting this wrong can be extremely costly.

Contact

Dr Marc Van Grondelle

Dr Marc van Grondelle

Head of the Global Joint Ventures Practice

+44 20 7694 4603

Email Marc

  

“Many companies now recognise that to protect value they need to build internal JV capability.”

 

Emma Blackley

Emma Blackley

Global Joint Ventures Practice

+44 20 7694 1844

Email Emma

 

    

“If you aren’t confident “what would happen if” certain business changes or crises occurred, your JV governance is only as good as your luck.”