Joint Venture vs. partnership vs. M&A

When you have a desire to grow a company or achieve more by interacting with other entrepreneurs, there are several paths you can take. In this article, you will learn about the features of Joint Venture vs. partnership vs. M&A.

Joint venture

A joint venture is a form of interaction between business entities on an ongoing basis for close cooperation and the achievement of joint goals.

You can create a joint venture by concluding one agreement on joint activities (that is, creating a simple partnership) or several complex agreements (agency, guarantee agreements, commissions, mixed contracts).

Another option is to register a separate legal entity. The second method is chosen much more often in practice since it is the simplest and most effective.

Partnership

Partnership implies that there is no clear division of shares and responsibilities in the business as such. Everyone is engaged in the work that is best given to him, due to which the development and growth of the business are carried out.

The key advantage of the model is that you make the minimum number of mistakes and move towards the goal as quickly as possible. This model is optimal in markets that are either already established or are growing rapidly.

Two important factors for a successful partnership.

Confidence

When you start cooperation (especially if it is a partnership), you need to decide on the shore that you are ready to trust this person.

Because if you do not have trust, then you will always doubt and double-check other people’s decisions. This, in turn, will take a lot of energy and greatly slow down the development of the project.

No competition between partners

The essence of the paragraph is that partners should look primarily at the qualities that allow them to strengthen each other, and not compete.

If you learn to play on the same team, then your partnership will be 10 times stronger. In general, this applies to all spheres of our life – work, friendship, family relationships.

M&A

Mergers and acquisitions of enterprises, as transactions for the acquisition of some companies by others, at different times, regardless of the country, attracted attention, gave rise to lengthy discussions, discussions, and forecasts in financial circles. This is because they were carried out in the overwhelming majority between well-known companies, which, moreover, were competitors. Depending on the purpose and mood of the initiating company, such alliances with competitors are friendly or hostile.

 

Unfortunately, the results of concluded transactions do not always testify to the effectiveness and expediency of a merger or acquisition. Studies show that the number of unsuccessful transactions is about 60% of the total. The main reason for this is that the income received as a result of the merger of companies does not cover all the costs of the merger process (for example, the acquisition of shares, the redemption of obligations, etc.). The negative consequences of merger or acquisition agreements are due not only to financial losses but also to a decrease in the effectiveness of the management system of the combined company.

In general, evaluating the examples and experience of companies that have entered into merger or acquisition agreements, it can be argued that this procedure is especially attractive for companies that are in a difficult financial situation. For domestic companies on the verge of bankruptcy, a merger with a powerful competitor, in our opinion, is a more acceptable prospect than a lengthy and often useless reorganization procedure.

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Which form of cooperation to choose: Joint Venture vs. partnership vs. M&A

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