JOINT VENTURE PARTNERSHIPS have a significant say in the structure, actions, and strategy of a venture. Management also has a voice in the direction of the joint venture. But what partners and management often fail to understand is there is another, silent party at the table influencing the outcome of key decisions: the status quo. In fact, the status quo (i.e., current state) plays a dramatic role in the life of a joint venture. It affects the deal terms the parties agree to and minimizes changes to the venture once operating (Exhibit 1).
STATUS QUO IN NEGOTIATIONS
During initial deal negotiations, the “status quo” is determined by the party who provides the first draft of a term sheet or joint venture agreement. The other partner is highly likely to “anchor” on the valuations and other contractual provisions in this initial draft.
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SECONDEES PLAY a key role in many joint ventures: some 80% of joint ventures have secondees in top management roles (e.g., COO, CFO) and 55% have a seconded CEO (
Exhibit 1). Parent companies use secondees for various reasons – for instance, to provide critical skills and capabilities, to accelerate initial staffing in experienced roles, or to secure added transparency, assurance, and influence over venture activities.
But companies often fail to adequately define and align on how secondees will be managed once in the joint venture. This can lead to secondees unable to answer a seemingly simple question: Who’s my boss?
It doesn’t have to be this way. Read More
But companies often fail to adequately define and align on how secondees will be managed once in the joint venture. This can lead to secondees unable to answer a seemingly simple question: Who’s my boss?
It doesn’t have to be this way. Read More
