A story is told about Google, and how the company attempted to enter the Chinese market. In China, foreign companies are mandated by law to form joint ventures with local firms. Google formed a joint venture. After it did this, the people it formed the venture with stole the intellectual property and formed Baidu. Baidu grew so big and forced Google to exit the Chinese market. The same happened to Uber. This is what happens when joint ventures go wrong. In this report, we will look at the key tips to remember when forming a joint venture.
Always Have a Good Lawyer
The first tip when you are thinking of forming a joint venture is to have a good corporate lawyer in Cyprus. The lawyer will be an invaluable asset when doing the JV. The lawyer will do background research about the company you are entering into a partnership with. They will also come up with legal documents to ensure that everything is in order. The lawyers will also advise on the size of stakes to give and the nature of the JV. In all these, you should have a good lawyer like Pagecorp Group, who has a good understanding of structuring these deals.
In the introduction, we looked at how Google and Uber failed in China. Yet, many American companies have had a lot of success in China. The difference is that Google and Uber did not do a lot of research about the people they were entering into a relationship with. Before you do a joint venture, take a few months doing background research about the people. Have they done other JVs before? If they did, what was the outcome? How ethical are they? How successful are their companies?
A Well-Defined Exit Clause
A joint venture is like a marriage. All couples, when getting married, want it to work. Yet, most marriages fail. This is the main reason why the concept of prenuptial agreements has been on the rise. A prenuptial agreement anticipates that a divorce might come and puts in place measures to prevent an acrimonious one. Similarly, all joint ventures should anticipate difficulties in the future by having a well-defined exit clause.
Joint ventures are all about trust. It is almost impossible for a joint venture to exist well without trust. As a result, the leaders of the JV should work hard to ensure that they are on the same page. They should avoid anything that would jeopardize the relationship. Also, avoid saying things that are untrue or spreading rumors. These are the key reasons why JVs fail.
In summary, joint ventures are excellent ways of running a business. They are important when there is limited capital by the two sides. Also, they are important when two teams want to take advantage of others’ expertise and knowledge. Therefore, as a company, you should always work hard to ensure that the JV works. If it is not, you should use the exit clause to end the JV.