Unlocking International Joint Ventures

CHAPTER ONEINTRODUCTION:WHY INTERNATIONAL JOINT VENTURES ARE SO POPULAR… AND SO HARD

‘A great marriage is not when the “perfect couple” comes together. It is when an imperfect couple learns to enjoy their differences.’

– David Meuer

There are many reasons for considering an international joint venture (IJV). Sometimes IJVs are the only legal way for a foreign investor to operate in a jurisdiction. In other cases, an IJV is likely practically the only way to operate in a sensitive sector. However, most Western partners enter into IJVs for commercial, not legal reasons. In most cases, the IJV is seen as a means to lower risk (i.e. benefit from the local partner’s knowledge, resources, network, sales channels, etc.) or in some cases to share the risk (i.e. sharing large capital investment costs to realize a major project such as a new mine) or there is a strong business case to team up (i.e. special opportunity, access to a unique asset, strengthen control over an essential part of a supply chain, etc.).

Once you determine that the IJV is the way forward, then the next logical step is to consider the partners. Most problems in IJVs stem from the partners. Most Western partners do not realize that they are often the problem. Accordingly, before stress-proofing the local partner it makes sense to self-reflect. Ask yourself whether you would be a good IJV partner – and what changes may be required to make you a good partner (including availability of people, attention at HQ, governance/operational ...