Joint ventures provide a way for companies to combine their resources to develop an idea, technology or project. It’s different from an acquisition, merger or strategic alliance because there’s no ownership transfer. In a joint venture, both partners contribute assets to an undertaking and both share the costs and benefits of it.
They are often beneficial to new businesses that lack technology, resources or access to markets that another company has, but have something to offer that the other organization lacks. When companies with complementary capabilities and goals pair up, they can often more easily achieve their goals.
Joint ventures are usually formed for a particular undertaking, so they have a finite lifespan. That lifespan can be short or long. Joint ventures are more flexible than an acquisition, merger or strategic alliance. However, that actually presents unique challenges regarding organizational structure, division of labor and corporate culture.
This means that these things as well as the objectives of the joint venture need to be clearly detailed and communicated. If they aren’t, the chances of success diminish. The largest determiner of success, according to some experts, is strategic planning.
It’s also important for your business to have an exit strategy from the joint venture once the project or goal is complete. Businesses without an exit strategy sometimes find themselves being bought out by their partner.
If you’re considering forming a joint venture, it’s important to seek legal guidance from a Michigan attorney experienced in business law who can answer your questions and help ensure that your company is protected as you embark on your endeavor.
Source: Inc., “When a Joint Venture Makes Sense,” Karl Stark and Bill Stewart, accessed Sep. 09, 2016
