The Joint Venture Exchange (JVX)

2010

Joint Venture Advisory Group subscribers may view copies of all JVXs via subscriber access.

Enabling Growth (Dec 2010)

Topic: Strategy, Scope, and Planning

Because many JVsare closely related to – or even directly connected with – parent company businesses, opportunities often emerge for the JV to create value by working with the parents in new and uneven ways. Doing an uneven deal with one parent might sound like a dangerous place for a JV. But not always.

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Board Ballet (Nov 2010)

Topic: Governance

For better or worse, the vast majority of time and attention that JV Board Directors spend thinking about the business or asset happens within the narrow confines of Board and committee meetings. As a result, orchestrating the Board’s annual agenda is a critical tool for JV Chairs and CEOs to engage, energize, and get value out of the Board. 

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Succeeding in Cross Cultural JVs (Oct 2010)

Topic: Special Topics

Joint Ventures usually bring together companies from different countries and industries, of different sizes, and with different ownership structures – e.g. stateowned enterprises vs. listed companies vs. family-owned or privately-held companies. As a result, JV CEOs and Boards have to deal with enduring cultural and organizational differences among the parent companies, while also building a common culture in the venture – challenges not faced in M&A transactions or within wholly owned companies. As one CEO said, “It’s like being a peace negotiator or an arbitrator of a high-stakes legal case – except the negotiations never end.”

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JV Operating Model (Sep 2010)

Topic: Strategy, Scope, and Planning

Perhaps no other aspect of joint ventures has caused so much trouble in the last five years as an ill-defined, outdated, or inappropriate operating model.

In a general sense, an operating model is a high-level architecture of the organization – how the various structures, systems, processes, and people within the enterprise relate to each other to deliver the strategy. In JVs, the operating model is defined by the venture’s overall level of independence from – or dependence on – its shareholders (Exhibit 1). Some joint ventures, like Dow Corning, Aera Energy, and Sony Ericsson, are highly independent. Others, including most upstream oil, gas and mining JVs, are operated by one partner.

Our recent analysis of 40 JVs, suggest that many JV operating models are ill-defined or out-of-kilter. In some cases, there are enormous cost synergies available by moving the model closer to one share-holder. In other cases, greater venture independence is needed to enable innovation, marketplace nimbleness, and entrepreneurship – or free up the JV from conflicts with the parent companies.

Addressing these issues is an urgent task for many JV Boards.

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Running a Partner Influencing Campaign (Aug 2010)

Topic: Governance

Like most family photos, the picture of many joint ventures conceals deeper frustrations. Minority or non-operating partners often feel as if they have limited influence after the deal is signed, absent blocking powers or a looming major capital investmentdecision. Meanwhile, the operating partner or venture management team think the non-operating partner is not engaging constructively, creating a partner drag that slows cycle times, increases operator costs, and clogs up the system with uncoordinated requests.

 It doesn’t have to be this way.

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The Case for the Independent JV Directors (Jul 2010)

Topic: Governance

Venture capitalists have come to appreciate them. But the independent director – a true outsider who is neither a member of management nor the representative of a single shareholder – has long been overlooked in joint ventures. Historically, only 1-3% of JV Boards contained independent directors.

This is a mistake. We believe that 40-60% of large JVs would benefit from one or two independent directors.

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Guiding Principles fo r Your JV (Jun 2010)

Topic: Governance

When a joint venture is formed, the strategy, scope, governance, and underlying deal logic can feel overwhelmingly clear. But fast forward a few months or years, and partner differences are likely to emerge. Any tool that helps manage shareholder alignment, and do so in an efficient way, is extraordinarily valuable. The purpose of this JVX is to outline one such tool: Board-endorsed Guiding Principles.

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Structuring JVs (May 2010)

Topic: Strategy, Scope, and Planning

The great advantage of joint ventures - the freedom to combine capabilities of two or more players in creative ways - also makes many inherently challenging to structure. The flexibility afforded by joint ventures requires deal makers to make design choices on multiple dimensions.  This issue of The Joint Venture Exchange offers a five-part checklist that can be used to structure non-traditional JVs and to pressure-test new deal concepts. We also offer some advice on how to ensure that the JV negotiation process leads to either a "quick no" or a "good yes."

The Essential Role of a JV Review (Apr 2010)

Topic: Governance

We recently analyzed the shareholder review processes in three dozen large, 50-50 style joint ventures, and discovered a paradox. On the one hand, most joint ventures are subjected to quite rigorous financial and operational scrutiny. But shareholders aren't looking at what's likely to be the biggest risk, source of value, and driver of personal frustration – fewer than 25% of JVs conduct any kind of Joint Venture Review that systematically looks at how the shareholders and management team are doing as a group.  

Shaping Strategy In JVs (Mar 2010)

Topic: Strategy, Scope, and Planning

Joint ventures are often scoped as fairly narrowly - initially formed to operate within the confines of a specific product market. However, after three to five years, most JVs start to see new opportunities.  While the ability to respond to such opportunities is critical, most JVs are not well-prepared to develop these opportunities or evolve their strategy - a fact that can become painfully obvious to the JV CEO as rivals adapt more quickly to threats and opportunities.

How Do You Rate as a JV Director? (Feb 2010)

Topic: Governance

We think that an annual self-assessment - or a confidential 360-degree assessment among Directors - should be a regular feature of JV governance systems. Fewer than 10% of JV Boards use any form of director assessment; and of those that do, almost all deploy tools designed for corporate boards - and thus miss the heart of the unique responsibilities and issues of a JV Director.

Delegations of Authority – Rethinking the Definition of JV CEO Power (Jan 2010)

Topic: Governance

When JV Board and CEO powers are not defined beyond traditional statutory powers, a perfectly good joint venture can start to unravel. The costs can be very real: JV CEOs quit over this issue; capital investments and new product launches get delayed; synergies between partners never materialize; and, when the delegations are too broad, parent companies are exposed to new and unnecessary risks and liabilities.

List 2009 Issues