Important Factors To Be
Considered before a JV is Formed
Screening of prospective partners;
Looking for
business synergies, matching goals, complementary
distinctive capabilities
and
core competencies;
Joint development of a detailed
business plan and shortlisting a set of prospective partners based on
their contribution to developing a business plan;
Due
diligence ‒ checking the credentials of the other party ("trust and
verify" − trust the information you receive from from the prospective
partner, but it's good business practice to verify the facts through
interviews with third parties);
Development of an exit strategy and terms of
dissolution of the joint venture;
Most appropriate
structure (e.g. most joint
ventures involving
fast growing companies are structured as strategic
and synergistic
corporate
partnerships);
Availability of appreciated or depreciated
property being contributed to the joint venture; by misunderstanding the
significance of appreciated property, companies can fundamentally weaken the
economics of the deal for themselves and their partners;
Special allocations of
income,
profit, loss or
deduction to be made among the partners;
Compensation to the members that provide
services.
