Non-Operated Joint Ventures: Does Asset Team Size Matter?

By Martin Mogstad | Tuesday, June 27, 2017

NON-OPERATED ASSET TEAMS are under assault. Staring into low commodity prices, non-operated asset teams in petroleum, minerals, and other natural resource sectors are under pressure to reduce team size. Attempting to shelter their teams – and make a fair and fact-based determination of the right team size – many non-operated asset managers and executive sponsors lack the data and perspectives to do this well.

It doesn’t have to be this way.

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Setting Transfer Prices in Manufacturing Joint Ventures

By Lois D'Costa | Tuesday, June 20, 2017

IN SCALE AND PROCESS INTENSIVE industries such as automotive, semiconductors, chemicals, and metals, it is common for industry peers to enter into joint ventures to manufacture intermediate or end products, and for the owners to be the venture’s sole customers (Exhibits 1A and 1B). General Motors and Toyota established their NUMMI joint venture to design and manufacture sub-compact cars, which the owners branded and sold separately under the Chevrolet Nova and Toyota Corolla monikers. Similarly, Intel and Micron entered into a semiconductor JV, IM Flash Technologies, to manufacture memory devices. In that venture, the owners perform the process technology development work separately outside the venture, and each takes ownership of its share of the memory devices that the venture manufacturers, which each in turn sells into the market under its own brand.

The concept is simple. But setting the transfer price is often not.

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The Term Sheet's Forgotten Twin: An Organized Repository for Unsticking Negotiations

By James Bamford | Tuesday, June 13, 2017

IN A PREVIOUS ARTICLE, Clearing the Fog of Negotiations: The JV Positioning Sheet Defined, we defined a Positioning Sheet, in it’s simplest form, as a table or spreadsheet developed by the deal team that defines, for each major transaction term, the Company’s preferred position, lead fallback position, alternative ways to structure that transaction term, and walkaway positions. As a living document to be updated across the negotiation of a Term Sheet and subsequent deal documents, the Positioning Sheet is a powerful and easy way to keep a structured inventory of potential deal terms, and to maintain internal alignment on the Company’s preferred and fallback positions.

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What Makes Critical Conversations in Joint Ventures So Hard

By James Bamford | Tuesday, May 30, 2017

IN A PREVIOUS INSIGHT, Critical Conversations in JVs: What’s Your State of Readiness?, we defined the critical conversation as the one meeting a year in which the CEO has the opportunity for a more strategic conversation with his or her owners.

Critical conversations are challenging. Our data shows 53% of JV CEOs struggle to secure alignment on a long-term strategy and evolution path for their venture, and 72% experience real difficulty in aligning their owners and board on the JV’s medium-term plan. And more than 70% of JV CEOs stay in the role for three years or less – often because they struggle with these critical conversations, and fail to meaningfully drive the business forward.

Several factors make these conversations structurally challenging. For starters, the owners may have fundamental misalignments outside of the JV CEO’s control that cannot be resolved solely in the boardroom. Additionally, with median JV Director tenure of just 30 months, high turnover on JV Boards puts a burden on management to bring all Directors up to a com- mon base of understanding of the JV – which is needed prior to major decisions. High turnover also means that Directors often don’t have strong personal relationships with each other, or with the CEO. And many JV Directors have limited experience sitting on Boards and bring an operational mindset to the role – which makes strategic discussions difficult to keep on track.

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Reality Distortion Field Ahead: A Warning From Two Experienced JV CEOs

By Peter Daniel | Tuesday, May 23, 2017

CHRIS FURMAN, CEO of Ventura Foods, and Sean Slovenski, former CEO of Care Innovations (Box 1), joined us for a recent webinar to share some of what they have learned in their combined 14 years running joint ventures. Chris has been in his role for seven years - more than double the median tenure for JV CEOs. Sean, with three JV CEO stints under his belt, and experience with an additional three JVs, has been in and around joint ventures for most of his professional life. Sean said that the opportunity for one plus one to equal three is the reason he keeps coming back to joint ventures. We are fortunate to work with Chris and Sean as part of our Joint Venture Advisory Group, and we thank them for their willingness to share their unique and valuable perspectives with other members of the Group.

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Critical Conversations in JVs: What’s Your State of Readiness?

By James Bamford | Tuesday, May 16, 2017

IF YOU’RE A JV CEO, you have a series of interactions with your owners across the course of the year. Some are planned and formal – regular board and committee meetings, for instance. Others are informal – e-mails, one-off phone calls, and visits – to address specific issues or generally catch-up.

In most joint ventures, there is one meeting a year in which the CEO has the opportunity for a more strategic conversation with his or her owners – a chance to step back from the quarterly quizzing on financial and operating performance, and the press of recurring topics such as annual budgeting and compensation, to talk about and secure owner commitment on larger, more strategic issues that can fundamentally change the JV’s direction and performance.

We call this a critical conversation.

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Managing Anti-Bribery and Corruption in Emerging Markets: Getting to a Good Yes

By Joshua Kwicinski | Tuesday, May 9, 2017
EMERGING MARKETS REMAIN an important source of growth for many of the world’s largest companies. Recent headlines have underscored the importance of managing corruption and bribery risk in emerging market joint ventures.

In late 2016, Rio Tinto announced it was deferring a decision on performance-related pay for former CEO Sam Walsh, pending the result of an ongoing investigation into alleged illegal payments related to its Simandou joint venture in Guinea – a crisis which has already triggered executive resignations and threats of shareholder lawsuits before any formal enforcement action takes place. Also in the news is Claudio Descalzi, the CEO of Eni, who was recently reappointed to the role despite being charged earlier in the year with international corruption related to a Nigerian exploration license purchase.
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First-Hand Perspectives On JV Dealmaking In The Energy Storage Sector

By Cristina Sima | Tuesday, April 25, 2017
WATER STREET PARTNERS regularly convenes seasoned dealmakers to share their personal outlooks on the challenges and opportunities inherent to joint venture dealmaking.

The power sector in particular is in a state of substantial flux globally. Reacting to the rise of distributed electricity generation, new utility and customer business models, and mounting concerns about the consequences of global climate change, governments and regulatory bodies are compelling the sector to transition away from power generation dependent on fossil fuels to more sustainable and renewable alternatives.
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