To JV or not to JV… that is the question!

ind_cbt_glb_ho_1561_loFor a couple starting out a personal relationship, when you are both single, all you care about are your own selfish needs. Yet when courtship begins, the mutual need for the ‘relationship’ to succeed takes precedence and the combined gain is much larger than either party could have achieved individually. A joint venture between companies could be uncannily similar to such a relationship.

By definition, a Joint Venture (“JV”) is a contractual arrangement in which resources are combined by two or more participants with a view to carrying out a common purpose. I have worked with many in the Middle East, and I believe that in order for a Joint Venture to succeed, it needs to be less of an arrangement and more of a relationship between two parties, built on mutual trust and respect and transparent and open communication.

From what I have seen over the years and observing which JVs are successful and which have had their challenges, I would agree with many that there are many factors to consider when making the decision of whether to form a JV or not. The most important element in the decision process is who the prospective JV partner will be and how they operate. This will be critical to the success of the potential JV project. It must be made abundantly clear that the JV companies have the same attitude, values and ethics in order to operate together successfully. It all sounds so simple….but it is not.

Many potential JV partners are not from the region (Asia, Americas, Europe and others) and may have different cultural values and certainly would have different protocols for communication and decision making – all of which could potentially create stumbling blocks if not properly addressed at the onset, by agreeing to a set JV protocol and communication strategy. As we all know from any relationship, all JV parties need to be kept happy and updated. The best way to do this is to ensure that each party is aware of what is expected in terms of effort, input and what benefits will accrue as a result of that. If one party does not keep to its agreed commitments, they may find the locks on the door have changed!

Mainly due to the scale of the Mega Projects seen in the region of late, it is unrealistic for one entity to be able to cope with the sheer size and complexity of these projects. Joint Ventures seem to be the only viable solution to bring together the required expertise and capability to deliver these projects within the required timeframe. JVs can be highly successful and lucrative for all parties involved – but it is imperative they be approached with the right mindset: keep them simple and transparent. I have seen where these arrangements get overly complicated and it just results in prolonged decision making which has the potential to become antagonistic and unproductive.

Open channels of communication, clear decision making processes and similar approaches to problem solving – which happens daily on these projects – set a good platform for a successful JV project. Yes, indeed, very much like a personal relationship.

For the full report click the following link: http://bit.ly/163aZOD

by: Cynthia Corby, partner, construction industry leader, Deloitte Middle East

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