Joint ventures are like marriages – great when they work but when they fail, things can get nasty.

It is due to this that you want to make sure that you have the right team for the right job. Joint Venture disputes are rightly perceived to be like an acrimonious divorce. Understanding this, and the business rationale for JVAs, helps us create the right resolution strategy when things go wrong. As such we are there at the beginning and (when needed) at the end of JVAs. We have a very knowledgeable team that can help you with:

• What protective provisions should sit in the JVA to minimise the risk of disputes
• The due diligence that should be carried out before entering into a JVA
• Ensuring that the commercial and financial objectives of the parties are properly recorded in the JVA
• Identifying unrealistic elements that a JVA should exclude
• Ring fencing risks through the use of SPV’s
• Using the right dispute resolution clauses to protect privacy and cost exposure
• Access to the funding market.

How can things go wrong?

We don’t draft every joint venture agreement in the market so there can be differentials of standard in how these are put together. The best ones will seek to address common risks and the worst ones will be convoluted, unclear and contradictory. However well or badly they are drafted though a joint venture agreement cannot protect you from every eventuality and if a dispute does arise between you and your joint venture partners you want a solicitor on your side who understands how these agreements are meant to work and can easily identify the issues, and the solutions to get it resolved.

We are specialised in all forms of alternative dispute resolution, arbitration, and High Court litigation and can use the whole toolbox to help you get the best outcome and resolve the dispute.

Common disputes that we see are:

1. Different Objectives: when objectives don’t precisely align between the joint venture partners it can threaten the success of the joint venture and cause the participants to come into deadlock (where nothing gets done and everyone is at each other throats) or the joint venture to be hijacked by one of the parties to the detriment of the other partners.
2. Cultural Mismatch: different management styles between the joint venture partners lead to poor integration and cooperation, threatening the success of the enterprise and quickly causing the joint venture to unravel as partners focus more on placing blame than on trying to overcome the difficulties holding back the project or contract.
3. Imbalance in Participants: different levels of expertise, investment, or assets or timing of when work is undertaken by different participants in the joint venture can lead to problems between the partners when one participant feels like they are contributing the lion’s share of the resources or work to make the project / contract a success and resent a 50/50 distribution of profits.
4. Changes in economic conditions: which may affect the profitability of the venture or the ability of one of the participants to effectively undertake their role in the joint venture agreement. This can be a particular issues when significant resources have been incurred.
5. Winding up of the Joint Venture: when unpicking the joint venture and distributing the assets and resources, intellectual property and other rights from the business there can be significant disagreements between the participants as to how these will be split.

Advantages of a joint venture

1. Shared Investment: each party to a venture contributes capital or resources and by working together can alleviate the financial burden of the contract or project on the individual participants and increase their capability to unlock larger and more lucrative opportunities.
2. Technical Expertise and Know How: different participants have different specialised skills and knowledge which allows them to start projects and bid for contracts that they would be unable to do on their own. Unlocking more specialised, and usually higher profit margin, opportunities.
3. New Market Penetration: a joint venture may enable companies to enter new markets very quickly, as all relevant regulations and logistics are taken care of by the local player. The new sector can be industry or geographic (or both) and can allow you to diversify your project and contract base to take advantage of changing markets conditions and opportunities.
4. New Revenue Streams: Small businesses often face having limited resources and access to capital for growth projects. By entering a joint venture with a larger company with more financial resources, the smaller business can expand more quickly. The lager company’s extensive distribution channels may also provide the smaller firm with larger and/or more diversified revenue streams while at the same time allowing the larger company to benefit from the revenue generated by the new product offering to its client base.
5. Intellectual Property Gain: Advanced technology is often difficult for businesses to create in-house. Therefore, entering a joint venture with a technologically rich but cash poor firm allows them to gain access to the technology, and so to have a productive advantage over its rivals, without incurring the cost investing in the same. This can give a business a competitive advantage or the ability to create a unique solution opening new markets and improving competitiveness.
6. Synergy Benefits: joint ventures can offer financial synergy which lower the cost of capital or operational synergy, where two firms working together increase operational efficiency. In either case, this can improve the profit margin earned on the project or contract or be used to provide a tendering advantage, so increasing the volume of converted opportunities.
7. Enhanced Credibility: participants working together can project larger balance sheets, greater market presence, and enhanced visibility which provides more credibility to projects and contract bids so improving conversion rates and, so, the speed of business growth.
8. Barriers to Competition: One of the reasons to form a joint venture is also to avoid competition and pricing pressure. Through collaboration with other companies, businesses can sometimes effectively erect barriers for competitors into specialised segments to protect their existing profits.

Funding & financial assistance

We work closely with the litigation funding and after the event insurance markets and so can often put together financing packages to alleviate some (or in some cases all) of the financial burden of what can be expensive, high stake and large value disputes.

For help with Joint Ventures and JV disputes or for more details on our funding packages please Contact Us.