esearch indicates that almost 70% of all joint ventures fail. Joint ventures (or JVs)—whereby two or more parties combine their resources in a joint business undertaking—can be a great way for start-up and established companies alike to obtain needed money or expertise, introduce new products or services to an existing market or bring existing products and services to a new market. So why do these relationships have such an alarmingly high failure rate? And what can you do to increase the likelihood that your next JV will be a success? Most JVs are doomed to failure from their inception for one or more of the following reasons: 1. Bad Ideas. In the classic JV situation, companies form a joint venture because neither of them, alone, has adequate resources (generally money, personnel, technology or expertise) to undertake the venture on its own. Increasingly, however, JVs are motivated less by resource sharing than by risk sharing. Companies use JVs to pursue products, services and markets that they have chosen not to pursue on their own because the projects are deemed too risky. Unfortunately, “risky” is often code for not worthwhile or uncommercial. If a project is not worth undertaking alone (assuming the company has the resources to do so), it may not be worth undertaking. 2. Insufficient Planning. One of the most prevalent reasons for failed joint ventures is a lack of sufficient planning. Joint venture “plans” consisting of nothing more than a statement of each party’s intended contributions to the JV and their respective share of the profits seldom work. The parties have nothing to shape their expectations or to govern their disputes. Parties of the joint venture should agree to a comprehensive written plan upfront including provisions for each of the following:
by Deborah Spranger
a. The form of the JV whether , contractual or a new entity; b. If a new entity, the choice of entity, now and in the future (which...