What are the best practices for structuring a joint venture to minimize conflicts of interest?

1 Align objectives and expectations

Before entering a JV, you need to have a clear and shared vision of what you want to achieve and how you will measure success. You also need to understand the motivations, capabilities, and constraints of your partner(s). This will help you align your objectives and expectations, and avoid misunderstandings and disputes later on. A good way to do this is to create a joint business plan that outlines the strategic rationale, goals, milestones, roles, responsibilities, and governance of the JV.

2 Define the scope and boundaries

Another key aspect of structuring a JV is to define the scope and boundaries of the collaboration. This means clarifying what activities, assets, resources, and markets are included or excluded from the JV, and how they will be shared or allocated among the partners. You also need to specify how the JV will interact with the parent companies, and how it will handle potential competition or conflict with their existing or future businesses. A clear scope and boundaries will help you avoid overlaps, gaps, or encroachments that could undermine the value and trust of the JV.

3 Establish a fair and flexible value-sharing mechanism

One of the most difficult and sensitive issues in a JV is how to share the value that is created or captured by the joint effort. You need to establish a fair and flexible value-sharing mechanism that reflects the contributions, risks, and expectations of each partner, and that can adapt to changing circumstances and opportunities. This may involve choosing an appropriate legal form, ownership structure, profit distribution, and exit strategy for the JV. You also need to consider how to deal with intangible assets, such as intellectual property, brand, or reputation, that may be generated or affected by the JV.

4 Create a strong and balanced governance structure

A successful JV requires a strong and balanced governance structure that enables effective decision-making, oversight, and communication among the partners and the JV management. You need to create a governance structure that reflects the level of integration, autonomy, and complexity of the JV, and that balances the interests and influence of each partner. This may include defining the roles and responsibilities of the board, the executive team, the committees, and the parent companies, as well as the processes and policies for resolving conflicts, disputes, or deadlocks.

5 Foster a positive and collaborative culture

Finally, a JV needs a positive and collaborative culture that supports the vision, values, and goals of the joint venture, and that fosters trust, respect, and cooperation among the partners and the JV employees. You need to foster a culture that recognizes and leverages the diversity, strengths, and synergies of the partners, and that encourages innovation, learning, and feedback. You also need to invest in building relationships, communication, and engagement across the JV and the parent companies, and to address any cultural or organizational barriers or gaps that may arise.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?