United Kingdom

Improving or exiting a Joint Venture 

 

 Joint Ventures  Rescuing failing or underperforming businesses requires a specialised skill set and approach. In an alliance or joint venture the requirements are even greater - you typically have less control, more stakeholders and greater complexity to manage. Our team of Joint Venture (JV) transformation specialists is uniquely qualified to help. We combine our international JV insight and leading practice with deep transformational (C-level) expertise, as well as technical and diplomatic skills. This is designed to ensure the right approaches are quickly identified and implemented sensitively (even where an exit may be required).
 

Termination of JVs in 2013 – facts and figures

The latest edition of Practical Law (2013) quotes the following statistics, based on analysis of various surveys of joint ventures in Europe, America and Japan: 

 

  • The average life of joint ventures is seven years; most survive for between three and seven years with less than one-third continuing for more than ten years.
  • Most joint ventures face serious management or financial difficulties within the first two years.
  • Three-quarters of joint ventures end with one party buying out the other(s).

Recent projects and insights

Exerting influence as a minority shareholder

Our client bought a minority, non-controlling interest in a business whose major subsidiary began to underperform significantly. Fearing they could not influence events, the client asked for our help. After determining their objectives from a re-set of the relationship, we helped them understand the agendas and “levers” to influence key stakeholders, including relevant insights into the cultural context. We provided coaching to help prepare for Board meetings in order for our client to begin – subtly yet powerfully – to influence the direction of travel. After further advice on the re-design of governance arrangements, performance is improving and we are helping to capture the lessons learned so that they may be applied elsewhere in our client’s global business.

Improve – to sell?

A major manufacturer was looking at a two year start-up delay, major quality issues and customers demanding compensation, but had invested US$600m. We were invited to diagnose the situation and identify specific, actionable areas for improvement. Once these were turned into a plan and implemented, the business achieved 90% production before eventually being sold successfully.

JV advice or marriage guidance?

When a joint venture has broken down, we often find ourselves spending more time on emotional responses than on business issues, especially in cultures which highly value dignity or a legacy to hand on. Just like a separated couple, partners often cannot hold a commercial business discussion until they have first offloaded their resentment and upset. However strong the contractual exit provisions and protections, these cannot help if the parties aren’t talking. Such deadlock can be broken by an independent “go between”, as in one recent Asian example, where our clients ultimately negotiated an amicable exit which protected both parties’ interests.

Impact of ineffectual Management

We were recently engaged (jointly) by the owners of a large Middle Eastern oil & gas JV to develop a turnaround plan to restore profitability in their underperforming joint business interest.  We quickly discovered that challenges in the business were at least partially due to ineffectual Management who had diverted significant energy away from the business itself in favour of trying to appease the disparate needs of both owners (i.e. their primary focus was keeping the peace).  Our involvement helped create much needed clarity of purpose for Management.  In just over a month, we helped develop an actionable turnaround plan that was endorsed by both owners.  Equally important, we were able to tactfully expose the underlying issues and mistrust between the parties which helped form the basis for a sensible JV reset and a better functioning management team.

Contact

 Dr Marc van Grondelle Dr Marc van Grondelle

Head of the Global Joint Ventures Practice

+44 20 7694 4603

Email Marc

 Rob Ware Rob Ware

Restructuring

+44 20 7694 3629

Email Rob

 Jon Slatkin Jon Slatkin

Restructuring

+44 20 7311 4806

Email Jon

 

“It’s always harder to change what happens in a JV after the first year; that’s why we always recommend an early “health check” to make sure all partners are happy and things are progressing as expected.”

 

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