A Joint Venture (JV) is a strategic business alliance in which two or more companies/investors/parties having a common purpose and objectives agree to pool their resources, expertise, and technology or know-how for the purpose of accomplishing certain business objectives based on a common business plan.
The business objective is usually in the form of a new project or activity. In a Joint Venture & Partnership management consulting firm, each company, investor, party, or participant is responsible for profits, losses, risks, and costs associated with it. Nevertheless, the Joint Venture is an entity different from the business interests of the participants or investors.
Structure of a Joint Venture
Joint Ventures can colloquially be referred to as partnerships but can be of different structures such as limited liability companies, partnerships, corporations, private limited companies, etc.
Joint Venture management consulting can be formed for a continuing purpose or for a limited purpose and can be a combination of large and smaller companies to execute large or small, projects and deals.
No matter what the legal structure is in the Joint Venture Strategic Alliance, the most significant document governing the Joint Venture is the agreement that sets out all of the shareholders' rights and obligations the aims and objectives of the Joint Venture, the business plan, the initial contributions of the investors, corporate governance, dispute settlement method, profit and loss sharing mechanism etc.
Advantages of a Joint Venture
- Investors/parties to the Joint Venture can offer new products and services to their customers;
- Joint Venture can help to achieve operational efficiency and cost-saving;
- Joint Venture can help parties save time;
- Joint Venture can assist parties to acquire new customers and penetrate new geographies; and
- Joint Venture can enable parties to gain new technology and know-how.
Main components of a Joint Venture:
- Structure – whether the Joint Venture will be a separate continuing business entity or simply for a short-term project;
- Objective – the purpose and goals of the Joint Venture ;
- Confidentiality – provisions for the parties to protect technology know how to trade and commercial secrets disclosed during the venture;
- Financial Contributions – quantum of money to be invested by each party in the joint venture;
- Assets and Employees – provisions relating to the assets and employees that each party is required to contribute, supervise and manage;
- Intellectual Property Ownership – determines the ownership of any intellectual property created in the Joint Venture ;
- Management – responsibilities of each party and the procedures to be followed in day to day operations of the Joint Venture;
- Profits, Losses, and Liabilities – specifies the manner in which, the profits are to be disbursed between the parties, the losses are to be shared between the parties and liabilities assigned;
- Disputes resolution-specific dispute settlement and resolution mechanism to resolve disputes that may arise between the parties; and
- Exit Strategy – provisions on how the Joint Venture may be terminated such as call/put option, right of first refusal, etc.
How ASC Helps?
- Project Assessment & briefing: ASC will take an in-depth understanding of the Joint Venture eligibility criteria and business background including product & service offerings, human capital strength, business size, and other required Joint Venture partner (target), proper strategy assessment session with the client’s management team.
- Research: Based on the project assessment, an in-depth economic analysis, market-specific scrutiny, and organizational target will be done by our expert professional to draw up potential targets list satisfying the Joint Venture criteria of the client. The target companies will be discussed with the client with suitable possible targets and solutions.
- Solicitation and Pursuit: Our team creates a specific approach based on the shortlisted targets at top management levels to discuss and negotiate the broad parameters of a value-chain partnership keeping it confidential.
- Target List: ASC Group’s team of professionals will prepare a suitable profile target, which will carry value against each shortlisted target for the client’s management.
- Presentation: Arrange management presentations from the target companies based on the suitable target, to the operational & financial, subject of course, and legal due diligence.
- Business Plan & Due diligence: ASC Group also help in the joint business plan preparation and facilitate and participate in the financial, legal, and operational due diligence, prepare binding Letter of Interest, etc.
- Negotiations: ASC will also prepare, participate and facilitate the negotiations between the client and the company until an agreement is reached and the Joint venture agreement completes, the closing of the transaction, and other advisory.