A recent Baker & McKenzie research report highlighted that 91 percent of surveyed business leaders plan to engage in some kind of transactional transformation within the next two years. While the acceleration of global M&A activity, on pace to potentially eclipse the record highs set in 2007, has captured many headlines, such transactions are not the only method to achieving such transformations.
In fact, more than half (54 percent) of respondents surveyed in that prior report identify partnerships or joint ventures as the route to attaining their corporate objectives. The reasons for this optimism can be found in the many advantages of entering into a joint venture:
- Fast entry into local markets
- Low market-entry costs
- Collaboration with a strong local player with established customer base, market presence, etc.
- Economical long-term resource commitment with shared risk
- Diminished political risk (e.g., government interference, nationalization, etc.)
- Absence of suitable acquisition targets or greenfield, organic projects
But, while joint ventures represent attractive options for higher-risk initiatives, entering such an arrangement does not obviate all risk. A recent survey from McKinsey & Company, for instance, determined that between 40 percent to 60 percent of companies’ joint ventures underperform their financial goals or business objectives, or fail outright.
To help navigate these challenges, we have launched an updated version of our International Joint Ventures Handbook, designed to help dealmakers understand the breadth and depth of business and legal considerations associated with joint ventures and ways to navigate the joint venture journey.
The handbook covers a wide range of topics, including:
- Comparison of different approaches to corporate alliances
- Due diligence — risk and compatibility assessment
- Joint venture structures, including ownership vehicles and management control options and director liability considerations
- Exit and termination issues
- Illustrative comparison summary table of equity joint venture vehicles, directors appointment, share capital, shareholders’ and cash repatriation issues in various jurisdictions
- Other considerations, including tax, dispute resolution, methods for contributing assets, non-competitive provisions, competition and antitrust law, foreign ownership restrictions, employee transfer and secondment issues
The new edition is still organized in checklist and questionnaire format and is written primarily from the perspective of the foreign or “non-local” party entering into a new jurisdiction, focusing on equity joint ventures.