Joint ventures (JVs) typically offer businesses a unique opportunity to pool resources, share risks, and leverage complementary strengths where there is an increasing size of projects which would ordinarily be beyond the resources of individual companies.

However, despite the potential rewards, over half of JVs fail because of these three main reasons:

• Clashing corporate cultures;
• A shift in strategy; or
• Prioritisation issues

So, to help you avoid this fate with your own JV, we have some strategies for you to explore to enhance your success rate.

Define clear objectives

Before entering into a JV, it is crucial for all parties involved to define clear, mutual objectives.

• Are you looking to enter a new market?
• Do you want to develop a new product?
• Are you intending to share resources?
• How do you intend to work together?

These are the kinds of questions you should be asking yourselves as having a shared vision is often half the battle when it comes to successful JVs.

A JV business plan is an essential component when seeking to maximise the likelihood of a successful JV.

To ensure these objectives remain attainable it is wise to establish key performance indicators (KPIs) to track the progress of your JV.

After all, if you are not assessing your progress, how will you know whether or not it is successful and where you can make improvements?

Also, you should always be prepared to adapt strategies and approaches as needed to respond to changing market conditions or unforeseen challenges.

Draft a comprehensive joint venture agreement

JV’s can be through mutual ownership (whether through limited companies, partnerships or limited liability partnerships) or simply contractual in nature.  There may be many factors which influence your vehicle of choice.

A well-structured JV agreement should clearly define each partner’s roles, responsibilities, contributions, profit-sharing arrangements, and methods for resolving disputes.

By outlining each of these clearly, you can prevent misunderstandings and significantly reduce the risk of disputes that could jeopardise the venture.

When misunderstandings do occur, they often result in costly legal battles and strained relationships between partners. They can also divert attention away from the objectives you set out to achieve, which are all scenarios business owners should want to avoid.

To minimise the risk of further damaging your partnership, effective dispute resolution methods can help prevent prolonged disagreements.

There may also be the need for other documents which support the JV Agreement including:

• A Management Agreement;
• Sale and Purchase contracts for acquiring assets;
• Intellectual Property Licences; and
• Secondment Agreements for relevant personnel.

For assistance in mitigating potential legal issues, we suggest engaging with legal professionals to draft or review your agreements early on in the process.

Legal experts have the knowledge and experience to protect the interests of all parties involved and identify any unforeseen liabilities and issues.

Foster open communication

Open and honest communication is something we advise in any sort of relationship, but it can be particularly valuable for JV’s.

Create an environment where the JV partners feel comfortable discussing concerns, sharing feedback, and resolving conflicts without receiving backlash. Just because an opinion is different to yours, it does not necessarily make it wrong.

Implementing regular progress reports and updates can help keep all parties aligned throughout the process and address any issues before they escalate.

Openly sharing information, especially regarding financial issues, fosters trust and credibility among partners, helping to avoid any suspicions.

Make sure you choose the right partner

When you are selecting a JV partner, it is important that you conduct thorough due diligence to ensure that potential partners possess complementary skills, resources, and a similar corporate culture.

Partners whose strengths fill gaps in your organisation will likely be more valuable than those who possess skills you already have in-house.

The greater the trust, the greater the likelihood of a successful JV.

Plan for exit strategies

Despite going into JV’s with the best intentions, not all of them are destined to succeed.

While nobody likes to contemplate the idea of failure, it is always best to plan for the worst-case scenario and create clear potential exit strategies from the outset.

You will need to discuss in detail and document the circumstances under which a JV partner may exit the venture and establish protocols for dissolution if necessary.

This proactive approach can help minimise disputes and provide a smoother transition if the JV needs to end.

How we can help

At Ansons Solicitors, we offer expert legal advice and support for joint ventures, aiming to enhance your chances of success while mitigating any potential risks.

Whether you are just beginning your planning process or require assistance with intricate legal issues, our experienced solicitors are ready to assist you.

If you are considering a joint venture and would like assistance, please contact our Corporate and Commercial team who will be happy to assist.