Unlocking International Joint Ventures

Comprehensive guide to forming successful international joint ventures

Written by Dr. Alan MacCharles, partner at Deloitte Consulting and Mark Schaub, senior partner at King & Wood Mallesons, the largest global law firm in Asia. Alan and Mark are both active commentators on joint venturing, geopolitics and industry-specific topics who have been cited or published in the Financial Times, NY Times, BBC, Bloomberg, and other media outlets.

Unlocking International Joint Ventures is a complete guide to understanding and successfully executing this powerful and highly complex business formation, with detailed information on how international joint ventures work, how to successfully form them, and key contributory factors that lead to success or failure.

This book is backed by research and professional case studies to show how concepts relate to real-world deals. In this book, you'll find information on:

• Similarities and differences of joint ventures compared to M&A, and why joint ventures are frequently significantly more complex
• The complexity of international joint ventures in different countries, such as China, with its large, state-owned enterprise (SOE) system, language barriers, cultural distance, different legal system, geo-political tensions, and rapidly changing operating environment
• Crucial laws, rules, and ways of doing business that affect international joint ventures across different industries and sectors
• A full set of tools and templates (with examples), methodologies and best practices developed over decades of experience working across multiple international joint venture formations covering the entire formation process from partner identification, negotiation and joint venture agreement signing
• Pointers as to how to select the right joint venture partner
• In-depth discussion on key negotiation issues that recur in almost every international joint venture including accounting consolidation, legal entity structuring, governance solutions, exit provisions, the role of trust, etc.
• Access to leading academic research distilled into actionable insights

Unlocking International Joint Ventures is an essential reference for executives, board members, consultants, and legal teams seeking to create successful deals by building on what's proven to work rather than trying to reinvent the wheel.

Preface xi

List of Abbreviations xiii

Section I Why a Joint Venture? 1

Chapter 1 Introduction: Why International Joint Ventures Are So Popular. . . and So Hard 3

Chapter 2 The Washing Machine: How the Jv Formation Process Actually Works 31

Chapter 3 Create a Process: Be Quick, Be Involved and Be Pragmatic 65

Chapter 4 Securing Internal Alignment: How to Avoid Damaging ‘own Goals’ 105

Section II Preparing a Jv 125

Chapter 5 Good Process Attributes: What Indicates a Negotiation Is Likely to Conclude Successfully? 127

Chapter 6 Options: Small Town Versus Big Town Marriages (or, It Makes Sense to Limit Partner Options) 151

Chapter 7 Know Yourself and Your Proposed Partner 171

Chapter 8 Negotiation Team: How to Assemble a Winning Team and Select the Right Lead Negotiator 195

Chapter 9 Picking An Advisor 213

Section III Negotiation and Aftermath 243

Chapter 10 What Are the Major Commercial Negotiation Points in An Ijv? 245

Chapter 11 The Joint Venture Contract: Negotiating An International Joint Venture Contract 279

Chapter 12 Jv End Stages – Successful Exit, Manageable De-coupling Or Toxic Dispute 317

Appendix A Generic Business Plan Table of Contents 355

Appendix B Task- and Partner-related Criteria Across Studies 359

Appendix C Illustrative Principles Developed Prior to First Negotiation Meeting 363

Appendix D Research Findings Summary 367

References 371

About the Authors 377

Acknowledgments 379

Index 381

ALAN MACCHARLES is a former partner at Monitor Deloitte where he spent almost 28 years in a range of roles and geographies. He previously built a Chinese pre-deal advisory practice to over 100 professionals. Alan advises the C-Suite of multinational clients.

MARK SCHAUB is a senior partner of King & Wood Mallesons and has been working as a lawyer in China since 1993. He is the author of several books in relation to doing business in China. Schaub regularly appears on BBC television and other media outlets.

Attracting billions of dollars in investment annually and employing millions, joint ventures are the most complex deals any organization can undertake. Getting them set up properly is essential, yet most executives are unclear where to start, especially across borders—and as a result, many careers have been ruined through unsuccessful international joint venture (IJV) negotiations.

Unlocking International Joint Ventures takes readers inside the formation process of IJVs, shows how they work, and identifies the key themes to success (and failure). Written by Alan MacCharles, former partner at Monitor Deloitte in Shanghai and contributor to Fortune, the Financial Times and other media outlets, and Mark Shaub, senior partner at King & Wood Mallesons, the largest global law firm in Asia, this book unpacks the practical steps that organizations can take to make this powerful business formation more successful and less resource intensive while enabling the development of shareholder value.

Backed by a wealth of research, professional case studies, and exclusive client testimonials, Unlocking International Joint Ventures includes detailed information on:

• Similarities and differences of joint ventures compared to M&A, and why joint ventures are frequently significantly more complex
• The complexity of international joint ventures in different countries, such as China, with its large, state-owned enterprise (SOE) system, language barriers, cultural distance, different legal system, geo-political tensions, and rapidly changing operating environment
• Crucial laws, rules, and ways of doing business that affect international joint ventures across different industries
• Frameworks, tools and templates to accelerate a negotiation and achieve a better outcome

Hundreds of companies undergo international joint ventures each year, currently reinventing the wheel each and every time. Unlocking International Joint Ventures delivers a proven roadmap for board members, change managers, consultants, legal teams, and many others throughout the organization involved in the day-to-day practicalities of a strategic move like a joint venture.

Praise for UNLOCKING INTERNATIONAL JOINT VENTURES

“Those of us steeped in international business think we are familiar with the ritual of deal negotiation and execution. But there is always more to learn! By practitioners and for practitioners, this practical, accessible and witty guide is an indispensable resource for your next international deal. Make room in your carry-on!”
—NOAH FRIEDMAN, Vice President, Strategy, Medtronic

“It is packed with strategies for setting up, implementing and navigating cross-border tie-ups. At the same time, it highlights common pitfalls and gives great tips to corporate foot soldiers on how not to fall into career suicide. A great resource.”
—DAVID FRIEDLANDER, Chair, King & Wood Mallesons (Australia)

“Joint ventures are an important and often misunderstood part of the business landscape. Pragmatic, insightful and tailored for executive teams looking to reduce blind spots and better translate JV ambitions into business reality. A practical book full of examples and tools written from a self-aware perspective.”
—JOHN ARMSTRONG, Investor Relations, Nestlé

“A clear, practical and insightful guide. Packed with key strategies for setting up, implementing and navigating cross-border partnerships.”
—LEE RANSON, Chief Executive Officer, Eversheds Sutherland (International) LLP