Running for the Exits: Getting Joint Venture Exit Right

By Gerard Baynham | Tuesday, October 20, 2020

JOINT VENTURE (JV) EXIT is a key issue for dealmakers and corporate executives whose portfolios contain material JVs spanning the globe.

One way or another, companies eventually exit their JV investments – sometimes sooner than expected. Recent analysis of JV lifespan data shows that newer vintages of JVs are undergoing exits more quickly than in the past. For example, JVs formed from 1985 to 1989 tended to last about 15 years, while those formed from 2005 to 2009 lasted only 6 years (Exhibit 1). This contributes to a high volume of exits.

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Shareholder Representatives in JVs: Legal Proxy, Accountable Executive, or Muddying Interloper?

By James Bamford | Wednesday, May 27, 2020

IN CERTAIN INSTANCES, a company will appoint an individual to serve as its “Shareholder Representative” to a joint venture. The basic premise is that the Shareholder Representative is expected to act as the company’s agent with regard to the venture – a role that is empowered but not necessarily limited to signing agreements, amendments, consents, and waivers between the company and the other shareholders and/or the joint venture entity. Although it is not common in all industries, having a designated Shareholder Representative is fairly prevalent in natural resources companies.

Fundamentally, the purpose of the Shareholder Representative is to establish organizational clarity for making legally-binding commitments between the company and other JV parties. A related purpose is to establish legal separation between the company, as a shareholder in the JV with its own interests, and the executives it has appointed to serve as Directors on the JV Board, who will have fiduciary duties to that entity.

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Innovation in Joint Ventures: Do or Die?

By Peter Daniel | Tuesday, April 21, 2020

IN INDUSTRIES LIKE HIGH-TECH, telecommunications, and healthcare, innovation is critical to sustained competitiveness and performance. Joint ventures operating in these fast-moving markets often must compete with innovation machines like IBM, and with PE-backed startups. In our experience, the ownership structure and contractual agreements of JVs may disadvantage them in this competition.

Specifically, pursuing innovation often requires a JV to make investments, potentially including acquisitions and minority investments, in domains that are not explicitly defined within the company’s authorized scope, and to secure funding from owners, which may have other capital needs, low risk tolerance, or insufficient understanding of the market to make such investments. What are JVs to do? We talked to 16 JV CEOs to find out whether, like Ms. Rometty, they see innovation as fundamental to survival – and, if so, how they define their innovation ambition, allocate budgets toward different innovation initiatives, and establish the tools and capabilities – talent, review processes, funding mechanisms, scouting/business development – necessary for sustained success.1

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JV Dealmaking: When to Kick the Can Down the Road

By Tracy Branding | Tuesday, February 25, 2020
IMAGINE YOU HAVE been tasked with negotiating a joint venture agreement. Months of grueling negotiations have consumed significant resources and have led to agreement between your company and the counterparty on all but a couple of items. These items will require significant work to resolve and are critical to the JV’s financing and operations. But year-end is approaching, your target for signing up the JV, and the fatigued deal teams could use a win. The counterparty wants to sign a JV agreement with the terms agreed to date and decide on the open issues in ancillary agreements later.

What do you do?

Should you sign the agreement based on agreed on terms and defer the remaining issues, perhaps finding resolution between signing and close or even to after closing? Or should you hold out and not sign any agreement until all issues are resolved?
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Consolidation Joint Ventures: Why to Consider These Deals

By Lois D'Costa | Tuesday, August 13, 2019

SOMETHING BIG SEEMS TO BE happening at corporate lunch counters the world over. We’ve recently been involved in a series of client conversations involving the formation of new consolidation JVs – that is, ventures to combine mature businesses into a jointly-owned entity. The oil and gas industry, beset by low oil prices but unable to conclude as many mergers and asset sales as it would like, is looking in earnest at such structures for the first time in a generation.

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How Due Diligence Differs for M&A and Joint Venture Deals

By James Bamford | Thursday, July 18, 2019

JOINT VENTURE AND M&A due diligence are superficially similar. Both follow the same basic process, starting when a preferred counterparty is identified and confidentiality agreements are signed, and usually concluding just prior to the signing of definitive agreements.  Both use similar advisors to investigate similar topics: Accounting firms lead financial due diligence; industry specialty consultancies perform parts of technical and operational due diligence; law firms drive legal and compliance due diligence. And both serve the same core purposes: To confirm that the company is getting what it expects from the counterparty, and to more deeply understand the counterparty’s assets and capabilities to inform transaction choice and key deal terms.

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