Making Alignment Real in Joint Ventures: Board Concurrence, Minutes, and the Post-Meeting Memo

By James Bamford | Tuesday, February 12, 2019

IT MAY BE AS DRY AS unbuttered toast but chew on this: Experienced JV CEOs use a variety of seemingly mundane pre-, post-, and within-Board meeting techniques to drive real, rather than perceived, alignment across their ventures. Our research has consistently shown that misalignment – whether among the owners, between the owners and management, or even within one owner company – is the single largest challenge facing joint ventures.

Every year, Water Street Partners hosts a JV CEO Roundtable in Washington DC. In our most recent roundtable, the discussion turned to how JV CEOs structure and manage Board conversations to foster alignment. That conversation unearthed three subtle practices that hold potentially broad relevance: the use of Board concurrence rather than approval, post-meeting memos, and the restructuring of JV Board agendas to drive alignment.

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Shareholder Stewardship of Joint Venture Employees: Opening the Aperture

By James Bamford | Tuesday, January 29, 2019

TENS OF MILLIONS of people are employed in joint venture companies around the world. In many cases, these ventures are partly-owned by large national and international companies. Today, Siemens, IBM, Royal Dutch Shell, General Motors, Airbus, and Nestle each have ownership interests in joint venture companies that employ tens of thousands of people. Typically, a tiny fraction of staff are seconded, or loaned, employees from one of the shareholders, while the vast majority are direct employees of the joint venture company.

Are shareholders doing enough to steward these employees – using their considerable scope, capabilities, networks, and development opportunities to enhance the level of engagement and employee value proposition of those directly employed by joint ventures?

In our experience, the answer is no.

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Operator Authorities: Deceptively Clear or Clearly Deceptive?

By Lois D'Costa | Tuesday, January 15, 2019

IN 2014, ONE OF Western Australia’s most successful natural resources partnerships started unraveling. Santos, the non-Operator partner of the multi-billion-dollar Spar gas joint venture, took Apache, the other partner, and Operator, to court. Santos claimed that Apache had breached the joint venture agreement by taking certain actions prior to receiving the Operating Committee’s formal approval, including completing front-end engineering and design, corresponding with regulators, awarding contracts for major equipment, and conducting other activities related to the project’s development. The Western Australia Supreme Court ruled in favor of Santos, stating that Apache – despite being motivated by time and cost advantages from moving quickly – had circumvented the oversight of the Operating Committee through which Santos was entitled to influence or have input into matters such as budgets, contract awards, and project timing.1

In the midst of the dispute, a fairly standard clause in natural resource joint venture agreements was dragged into the limelight: “The Operator has exclusive charge and conduct of operations as agent on behalf of the parties under the supervision and control of the Operating Committee.” The court asserted that there was no inference that an Operator could act without the authority of the Operating Committee.

This standard clause – present in some form in almost all natural resource joint venture agreements – has the potential to give many joint venture Operators and co-venturers considerable grief.

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An Inside Look at Joint Ventures and Other Deals in U.S. Healthcare

By Molly Farber | Tuesday, December 18, 2018

WATER STREET PARTNERS periodically convenes joint venture dealmakers from an array of industries and geographies to speak to the latest JV trends, challenges, and best practices from their vantage points. Most recently, we spoke with Scott Musch, the Vice President of Corporate Development at Cambia Health Solutions, for perspectives on joint ventures and other partnership transactions in U.S. healthcare. Cambia is a total health solutions company headquartered in Portland, Oregon; its family of companies includes Blue Cross Blue Shield plans operating in Oregon, Washington, Idaho, and Utah, as well as interests in other companies seeking to improve the consumer experience in healthcare.

The healthcare industry – particularly in the United States – remains subject to sustained disruption, with companies grappling with regulatory uncertainty, new types of competitors, and an evolving consumer and technological landscape. This flux has generated a substantial volume and diversity of deals, some of which have taken the form of joint ventures. Despite a track record of mixed performance (Exhibit 1), joint ventures remain top-of-mind for healthcare dealmakers, and in recent years have been deployed as a means to both cultivate innovation and consolidate scale in core competencies. Cambia, in particular, has emerged as a leader in healthcare innovation with substantial experience in partnerships, and we asked Scott for his thoughts on high-level deal trends as well as the particulars of certain transaction structures and terms.

An edited transcript of his remarks follow.

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Joint Venture Portfolio Governance: Highlights from the London Roundtable

By Sylvia Staneva | Tuesday, December 11, 2018

WATER STREET PARTNERS recently hosted its tenth annual Roundtable on JV Portfolio Governance for natural resource companies. Twenty industry executives, representing the oil and gas, mining, and chemicals sectors and collectively accountable for governing more than 700 non-operated ventures, gathered in Brown’s Hotel in London for this year’s installment to discuss what an approach to portfolio governance looks like today.

Four main topics were on the agenda:

1) Non-Operated Portfolio Governance Excellence: How much progress have natural resource companies made in recent years in putting in place the core practices to govern their portfolio of non-operated ventures? 

2) New Deal and Industry Trends, and Impact on Governance: What types of new ventures and forces are natural resource companies seeing, and how are these impacting the requirements of governing non-operated portfolios? 

3) Stock Market Announcement Effects: What types of venture announcements materially impact the share price of large natural resource companies, and what might companies do to better shape the narrative to investors? 

4) Corporate Social Responsibility Pressures on Non-Operated JVs: What impact are various external groups, from the Environmental Defense Fund to Transparency International, having?

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Joint Venture Dealmaker Outlook: Trends in Oil and Gas

By Sylvia Staneva | Tuesday, November 27, 2018
WATER STREET PARTNERS periodically convenes joint venture dealmakers from an array of industries and geographies to speak to the latest JV trends, challenges, and best practices from their vantage points. Most recently, Mike Henson, Manager of Infrastructure Development at Chevron, shared his perspectives on partnership trends in the oil and gas world.

Mike Henson has been with Chevron for 40 years, spending the last ten years in the downstream business development space. He is responsible for leading Chevron’s enterprise-wide effort to achieve the desired corporate infrastructure. Mike’s focus includes strategic planning and execution, building relationships with third-party infrastructure companies and trading partners, and identifying acquisition, divestiture, capital construction, or partnering of infrastructure assets.

Oil and gas and the energy industry more broadly has been a heavy utilizer of joint ventures for decades, though in recent years new dynamics and to some extent innovative deal terms and structures have emerged in response to global commodity prices, evolving geopolitical relations, and the advent of new technologies. Mike spoke to these and shared learnings from his decades working with joint ventures.

An edited transcript of his comments follows.

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