Why not check out: Strategic Alliance vs Joint Venture: What's the Difference? commitment of resources), a joint venture involves both creating a new legal entity, wherein both share risks and returns as well as corporate governance. Whereas a partnership usually entails a contract that demands both sides agree to fulfill certain criteria (e.g. PartnershipĪ joint venture is essentially a form of partnership which is more formally recognized. This example of an international joint venture enabled Asia Brewery to upgrade its brewing facilities and bring its operational practices in line with world class brewing standards, in return for distributing Heineken’s in-house brands across the country. An example of this came in 2016, when it created a joint venture in the Philippines with Asia Brewery Inc. One of the ways that brewing firm Heineken has achieved global ubiquity in bars has been through joint ventures with local players. HeinekenĬross-border joint ventures are also common. By pooling the media and investment resources of all four companies, the joint venture created something which was far more effective than the sum of its parts. These companies were later joined by Walt Disney. It began life as a joint venture in 2007 between NBC Universal, Providence Equity Partners, and News Corporation. Hulu, the online streaming service, is often cited as the classic example of a joint venture. Other varieties of launching joint ventures, based on the firms' business styles, include the following: Joint ventureship and its archetypes exist on a spectrum between start-ups and M&A deals. For example, a company with an excellent product or service and a company with a large distribution network. In this type of JV, two companies with complementary resources (functions) create a joint venture to enjoy synergies. Often the joint venture is wound down as soon as the project’s objectives have been achieved. Project joint venturesĪs the name implies, project joint ventures are established by two or more companies with the aim of developing a specific project. in the same horizontal space), horizontal joint ventures should enable all involved to enjoy the advantages of joint ventures. Horizontal joint venturesįormed by companies who would otherwise be competitors (i.e. An example could be a producer and a materials provider creating a JV. These joint ventures are created by two or more companies operating at different positions along a vertical supply chain. We look at each in more detail in the bullet points which follow: Vertical joint ventures There are generally considered to be four types of joint ventures: vertical joint ventures, horizontal joint ventures, project joint ventures, and functional joint ventures. Other reasons dealmakers form JVs are as follows: a new licence being granted), companies may need to pool resources through JVs or risk missing out on those benefits. When an opportunity has to be exploited within a certain timeframe to fully enjoy its benefits (e.g. The most commonly cited benefit of JVs is their potential for risk mitigation. On occasion, an opportunity to create a JV will present itself to the participants which will seem too obvious an opportunity to refuse (most commonly seen in cross-industry JVs). In the short-term, JVs can offer an alternative to achieve many of the same objectives, with much lower resource requirements. Not every company has the resources to immediately undertake an M&A transaction. Aside from the advantages of joint ventures (see below), which are also motivating factors for JVs, the following reasons often underpin the decision to undertake joint ventures: Lack of resources
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