Lois D'Costa

Lois is a senior consultant who advises clients on joint venture transactions and governance-related matters across a range of industries. She is responsible for benchmarking and other assessments that leverage Water Street Partners’ proprietary databases and repository of best practices. Lois joined Water Street Partners from McKinsey & Company, where she was a core member of the Corporate Finance Practice and worked extensively on issues related to joint ventures and other forms of alliances.

Recent Posts

Alternative Energy: Forces and Consequences

By Lois D'Costa | Tuesday, October 9, 2018

ONE OF THESE DAYS we are not going to need fossil fuels.” Not a routine utterance by an environmental analyst concerned about climate change, but the stunning public admission by Ali al-Naimi that alternative forms of energy are finally going mainstream.  Why does Ali al-Naimi’s prognosis of the future matter? He is the Petroleum Minister of Saudi Arabia – a nation whose wealth, power, and size are predicated on its vast reserves of oil, and also a nation that recently announced a more than $100 BN commitment to alternative energy1.  

Saudi Arabia is but a recent contributor to the global surge in alternative energy investments, which have increased by nearly 500% over the past decade2  and are expected to maintain an upward trajectory. Motivated by the multiple sources of value possible through partnerships, we estimate that companies will fulfill at least 40-60% of these investments through joint ventures and other strategic alliances3.  Consider a set of recent ventures across wind, bioenergy, solar, geothermal and other alternative energy sub-sectors (Exhibit 1).

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6 Critical Elements to Getting Your Shareholders Aligned on Growth

By Lois D'Costa | Tuesday, June 5, 2018

IT’S A LESSON COWBOYS LEARNED a long time ago: If you don’t want a group of horses to escape, don’t tie them to a tree – simply tie them to each other and they’re incapable of collectively making progress in any direction.

So it seems with joint ventures, especially consortia, shared utilities and other shared-ownership entities with more than a few owners. Here we look at a broadly-relevant issue – enabling growth – in the context of a class of ventures where the issue manifests itself in its most extreme: Joint ventures with 5-20 owners.

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Mapping a Joint Venture Value Chain Before It’s Too Late

By Lois D'Costa | Tuesday, May 22, 2018

THE DESIGN AND SUCCESS of many joint ventures is based on the ongoing flow of expertise, technology, services, market relationships, and other contributions from the parent companies. These flows may be provided under formal fee-for-service or other commercial agreements, or on a non-commercial basis as part of a parent’s implicit contributions to the joint enterprise. The North American Coffee Partnership, a multi-billion dollar JV between Starbucks and PepsiCo in ready-to-drink beverages, depends on its parent companies for coffee beans, bottling, and distribution services – and their know-how in quality control, formulations, product design, and retailing. Similarly, in CFM International, the commercial aircraft engine JV between General Electric and SNECMA of France that is one of the most successful joint ventures in history, the parent companies conduct engineering, design, production, assembly, and marketing activities on the venture’s behalf. 

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Royalty Payments in Joint Ventures – Explaining Low Rates and Unconventional Structures

By Lois D'Costa | Tuesday, May 8, 2018

IN STANDARD-FORM royalty arrangements, the intellectual property owner is typically compensated through a set percentage of gross revenue, net sales, gross sales receipts, or some other base metric. But when such licensing happens within a joint venture, with one of the shareholders licensing technology or other IP to the joint venture entity, that standard formula is often thrown out the window. In most cases, the royalty payment stream is mixed with other broader considerations related to shareholder contributions, ownership percentages, and total venture economics.

To understand how companies approach royalties in joint ventures, we recently analyzed 156 joint venture licensing contracts. The purpose of this note is to summarize some of our findings.

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Supplier Alliances: Using Contractual Terms to Increase Reliability

By Lois D'Costa | Tuesday, January 23, 2018

COMPANIES AS DIVERSE as Apple, Boeing, LyondellBasell, and Tesla depend on suppliers for inputs critical to their business (Exhibit 1). Suppliers might possess technological, locational, or infrastructural advantages that make them irreplaceable in the short-term. As such, even temporary disruptions in supply can create severe consequences. For example, bottlenecks in Panasonic’s supply of lithium-ion battery cells recently slowed Tesla’s Model 3 production ramp. Meanwhile, interruptions in power supplied from its electric utility supplier forced LyondellBasell to shutdown its Houston refinery, and deal with the resultant flaring and releases into the surrounding environment.

So how can companies in supplier alliances for critical inputs ensure that supplies are reliable?

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Managing Competitively Sensitive Information in Joint Ventures

By Lois D'Costa | Tuesday, November 21, 2017
FEW, IF ANY, COMPANIES enter into joint ventures with the explicit purpose of infringing on anti-competition laws. But even while the parties may not intend to fix prices, divide up markets, limit production, or engage in other collusive behavior, joint ventures nonetheless present an environment rich in anti-competition risk. The most common risks emanate from the inappropriate exchange of routine information through which JV Board Directors and other owner company representatives govern their interests in the JV, especially when the venture is between competitors.

Many companies require executives to go through legal and compliance training prior to serving on a JV Board. In our experience, this training tends to focus on bright-line violations of anti-competition laws. And because it is performed separately by individual owner companies, it will naturally vary across director groups. As a result, such training usually fails to address and align directors around how to handle “grey area” anti-competition issues that JV Directors face every day.

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