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.

Good joint venture governance

We are often asked to help clients review, amend or set up “good governance” with an alliance or joint venture. The essentials may look like sound business sense, but they frequently get ignored in the finalisation of a deal, the drafting of agreements and even the setting up of the venture itself. Click here to read more about the kind of things we mean.

 

Recent projects and insights

Who "owns" JV risk?

All too often we see concerns about joint venture risk being labelled within companies as "too difficult" or falling between management stools as "not part of my remit".  This can lead to delay or inaction, potentially damaging companies' financial returns and sometimes even their reputation.  So, ironically, less robust standards of professionalism and rigour are commonly applied to JVs and alliances, just where the opposite is demanded by the intrinsic reduction in control and transparency involved in such arrangements.  Many Boards are beginning to wake up to the need for this to change.

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.”