How to Prevent Commercial Conflicts in JV Deals

By Cassandra Tillinghast | Tuesday, March 22, 2016

COMMERCIAL CONFLICTS of interest are inherent to joint ventures. In many ventures, the shareholders provide products or services to – or share assets and infrastructure with – the venture. Or they might compete in markets directly adjacent to the venture, or have customers and contractors that overlap with it. This web of commercial relationships can spawn conflicts. If unchecked, they can lead to suboptimal outcomes for the JV or its shareholders. In drafting deal terms to help minimize conflicts, dealmakers need to balance three key considerations: Promoting and protecting the JV’s interests, promoting and protecting the shareholders’ interests, and meeting JV Director fiduciary duties and avoiding liability. However, during our experience advising JVs and their shareholders before, during, and after JV launch, we have found that managing commercial conflicts by promoting the JVs interests can significantly impact the short- and long-term value of a JV to its shareholders.

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