Partnering with You to Establish Alliances & Joint Ventures
Alliances and joint ventures (JVs) can be an attractive alternative to a
traditional acquisition or merger. Companies can often accomplish many of
the same objectives as through an acquisition, but typically with less cost
and less risk. Sometimes the ideal partner may not be for sale but open to
an alliance or JV. Or only certain skills or components of a prospective
partner are needed. Often a JV is a precursor to the ultimate acquisition or
divestiture of a particular division by one partner a “trial run”, so to speak.
But alliances and JVs can be fraught with challenges and risks. Just like
mergers and acquisitions, they often fail. Part of the problem is that in many
cases, the prospective partners and their advisors don’t fully appreciate the
unique challenges of an alliance or JV. Often they approach the transaction
as they would a merger or acquisition. This can spell disaster.
Unlike an acquisition, in a JV or alliance the two partners must work
together cohesively without the clear command and control that an
acquisition provides one party. Both partners must truly share the same objectives, have the same sense of commitment, have cultural
compatibility, and emerge in a “win-win” partnership. It is essential to
anticipate potential trouble spots and address how they will be resolved.
And converse as it may sound delineating exit provisions upfront is a
critical step. After all, you wouldn’t want your trade secrets going with
your departing partner, or to have a protracted battle over the value of the
alliance or JV in a breakup situation.