Routes to market
How to set up joint ventures abroad
What you’ll learn
- why you'd consider a joint venture
- how you'd prepare to set up a joint venture
- some of the advantages and risks involved
How a joint venture can help you trade
A joint venture (JV) is a business partnership between 2 or more companies that enables the partners to work together towards a specific business goal.
JVs can take the form of a newly created company with each partner owning shares in the new business. Or it can involve more limited cooperation between businesses, where each side agrees to work together in specific ways only.
A joint venture with an overseas company can be a quick and cost-effective route into a new market. It’s a great way to access regional knowledge, gain insights into local regulations and reduce risk to your business.
But there are a few things to consider before you start.
Do your research
Firstly, understand fully why you want to create a joint venture in this market. Where are the opportunities for a partnership? Is a JV a mandatory part of trading in the country?
As with all overseas trading you can reduce risks through solid planning and a good understanding of the local culture. With thorough research and an open-minded approach you can avoid many of the pitfalls and build a long-lasting, successful partnership.
Seek professional advice
Overseas joint ventures can be complex. Make sure you have experienced legal and trading advice from the outset – with experience in your home market and the one you want to do business in.
It’s also a good idea to draw up the legal documentation in advance of any joint venture, making sure it includes:
- definition of the terms – for example, management control and set up, financial commitments and how financial rewards are split
- key areas of responsibility for each party
- protection of IP for both parties
- a non-disclosure agreement (NDA) element to protect trade secrets, pricing and marketing strategies
- an exit strategy, if relevant
- details of dispute resolution and location of arbitration jurisdiction
Identify a partner
Look for an operation that complements yours. For example, if you have all the marketing capabilities back home, find a partner that can handle distribution. Always undertake due diligence on any potential business partners and be sure on legal and practical strategies for handling disputes, should they arise.
Set clear and realistic objectives from the start and build a strong partnership based on compatible cultures and complementary skills. Allow for success to be measured using a SMART approach, ensuring expectations are Specific, Measurable, Achievable, Realistic and Timely.
Do the groundwork
When you have a new partner, make sure you spend lots of time getting to know them. Understand how they work, be transparent with your objectives and realistic with your expectations, including the financial commitments you'll each be making. Are there any sources of funding, grants or other support you can access?
Think about how you’ll assign responsibilities and agree board structure and who has overall control of the operation.
Create a timeline
Before you work on a joint business plan, agree a timeline for the creation of the joint venture itself.