I am forming a joint venture

Forming the right partnership

As businesses seek opportunities to pivot and rapidly capture new market opportunities, joint ventures and strategic alliances are becoming more important venues for CEOs. However, the success rate of partnerships can be low, as the joint models require more communication commitment to build trust, more rigorous planning to drive collaboration, and more forward-looking structure to form equitable risk-sharing.

There are five key questions you should be addressing:

  1.  Have you and your JV partner(s) agree on each party’s financial and operational contributions to the joint business vision, and how you will share risks and benefits?
  2.  Is your draft JV funding structure legally robust and tax efficient in the set-up and operation stages?  Do you have an exit plan?
  3.  Have you jointly developed and signed off on a detailed business plan that outlines the financial and operating models? For Chinese SOE partner, this plan is also subject to regulatory approval
  4. Have you agreed on the JV governance framework to clearly define management level organizational structure, roles and responsibilities, and decision making protocols?
  5. How would the JV accommodate the different corporate cultures among partners, and harness the differences to make the alliance stronger and more innovative?

How we can help you:

  • Develop a high-level financial model by quantifying your business strategy and assumptions into financial forecast that highlights initial investment requirements and future financial returns
  • Explore the optimized JV structuring options by examining the JV structuring regulation and tax efficiency in the set-up (JV establishment, land injection, facility build), operation (import duties, subsidies, profit repatriation) stages 
  • Establish a clear and practical JV governance framework by aligning well-defined board and senior management structure, leadership roles and responsibilities, delegation of authorities and dispute resolution process (secure leg room)
  • Clarify the critical business processes and organizational capabilities by constructing a high-level target operating model that outlines the key operational processes, systems and organizational structure for Day 1 as well as future state
  • Design an effective communication program for the employees by documenting the culture differences among partner organizations and providing formal and informal opportunities for all members to develop strong working relationships
  • Formulate a JV launch plan by setting up / training a launch management team to centrally plan, coordinate and track the Day 1 readiness and first 100 days programs, and mobilize resources from JV and parent groups.

Factors for achieving a successful joint venture journey

Joint ventures, if done well, can lead to outperformance and competitive advantage. Nevertheless, these rewards can be accompanied by high risks. Constant vigilance and significant commitment from the senior leaders of each parent is necessary to maintain rigorous, professional end-to-end execution. Despite the fact that there is no “silver bullet” to help facilitate the success of an alliance, there are several factors that can help. 

Contact us

Wai Kay Eik
China and Hong Kong Deals Leader, PwC Hong Kong
Tel: +[852] 2289 2199
Email

Kushal Chadha
Partner
Tel: +[852] 2289 1815
Email

Wei Leon Guo
Partner
Tel: +[86] (10) 6533 2970
Email

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