The benefits and sleepless nights brought by joint ventures

Throughout the last 20+ years, the author Alex Steinberg, has advised clients in different joint venture and partnership arrangements.

For example, Alex Steinberg audited, evaluated, ranked and recommended suitable companies to become supplier partners of British Telecom. Masterminded a full 360-degree evaluation methodology & program that was implemented to fully assess, select and improve 1000+ supplier partners.

At Accenture, He and teams identified, managed and proposed thousands of potential joint venture partners to clients in different sectors around the world. In other settings, Alex supported individual joint venture forming & troubleshooting or helped design respective strategies & programs. One company, Alex took directly public on the London Stock exchange (AIM market) instead of pursuing a JV path.

Joint ventures feel sometimes like marriages

The idea of forming a joint venture (JV) with another company is simple, but the successful implementation is an entirely different story. We may compare forming a JV with two people entering into marriage. Once the thrills of the wedding night and honeymoon have passed, many people wake up to harsh reality: “oh, I expected different…”, “I never thought you would…”, “We should have agreed about that beforehand…”, “Sorry, conditions change…”, “The situation is different now. We are on different paths…”, "How do we get out of this mess...?"

Like before entering in marriage, you want to make sure with your Joint Venture arrangement that you should say "yes" to each other in the first place, agree of how to conduct your relationship and have mechanisms to evaluate and manage your relationship going forward!

Sometimes business organizations enter into joint ventures, like fresh couples in love. They do not think enough! They do not do their preparational “homework”, they never plan for problems ahead, and they do not have contingency plans.

This article (out of a JV series) is about providing you as business leader and decision maker a systematic perspective and some step-by-step guidance.

At least ten main reasons why Joint ventures fail:

1. Misaligned Objectives and Expectations: Partners may have different objectives, priorities, or expectations for the JV, leading to conflicts and disagreements over strategic direction, resource allocation, or performance targets.
2. Poor Partner Selection: Choosing the wrong partner based on inadequate due diligence or incompatible cultural, operational, or strategic fit can undermine trust, collaboration, and effectiveness within the JV.
3. Lack of Commitment or Investment: Partners may fail to commit sufficient resources, expertise, or support to the JV, resulting in limited progress, underperformance, or failure to meet objectives.
4. Communication Breakdown: Ineffective communication channels, cultural differences, or language barriers can impede collaboration, decision-making, and problem-solving, leading to misunderstandings or conflicts.
5. Inadequate Governance and Management: Weak governance structures, unclear roles and responsibilities, or inadequate leadership and management capabilities can result in disorganization, inefficiency, and decision-making delays.
6. Financial Issues: Financial challenges such as insufficient funding, cost overruns, cash flow problems, or inability to secure financing can strain the JV's operations and viability.
7. Strategic Misalignment: Changes in market conditions, technological disruptions, or shifts in industry dynamics may render the JV's strategic objectives or business model obsolete, requiring adjustments or restructuring.
8. Legal and Regulatory Challenges: Compliance failures, legal disputes, regulatory hurdles, or changes in legislation can pose significant risks and liabilities, leading to disruption or dissolution of the JV.
9. Cultural and Organizational Differences: Divergent corporate cultures, management styles, or organizational structures between partners can hinder integration, collaboration, and decision-making within the JV.
10. Unforeseen External Factors: External factors such as economic downturns, geopolitical instability, natural disasters, or global pandemics can disrupt operations, markets, or supply chains, impacting the JV's performance and sustainability.

?

Follow this systematic approach with these 12 steps, if your organization wants to enter into Joint Venture(s) with other companies in Saudi Arabia

1.? Clearly outline your company’s strategic objectives for the joint venture, such as developing affordable housing, infrastructure projects, or urban development initiatives in Saudi Arabia.

2.??Conduct extensive research on the housing and construction industry in Saudi Arabia. Analyze market trends, demand drivers, government policies, regulatory framework, and key players in the real estate sector.

3.??Establish specific criteria for evaluating potential JV partners based on their expertise, experience, financial strength, reputation, and alignment with your organization’s goals and values.

4.??Utilize your industry networks, trade associations, conferences, and business forums to network with potential JV partners in Saudi Arabia. Attend relevant events and engage with key stakeholders to explore partnership opportunities.

5.??Evaluate potential JV partners based on their track record in the Saudi Arabian market, including past projects, client references, market presence, and reputation for quality and reliability.

6.? Ensure alignment between your organization’s strategic objectives and the objectives of potential JV partners. Assess their vision, mission, values, and corporate culture to ensure compatibility and shared goals.

7.?Conduct thorough due diligence on potential JV partners to assess their financial stability, legal standing, project management capabilities, and compliance with regulatory requirements. Verify their credentials, performance history, and references.

8.?Identify and assess potential risks associated with each potential JV partner, including financial risks, legal risks, operational risks, and reputational risks. Evaluate their risk management practices and mitigation strategies.

9.??Initiate discussions with shortlisted potential JV partners to explore synergies, opportunities for collaboration, and mutual benefits. Negotiate terms of the JV agreement, including investment commitments, profit-sharing arrangements, and governance structure.

10. Ensure compliance with all legal and regulatory requirements governing JVs in Saudi Arabia. Seek legal advice to draft JV agreements, obtain necessary permits and approvals, and address any legal issues or concerns.

11.??Focus on building a sustainable partnership based on trust, transparency, and mutual respect. Emphasize the importance of long-term collaboration, shared accountability, and continuous communication to achieve common goals.

12.??Continuously monitor the performance of the JV partnership and its alignment with your organization's strategic objectives. Evaluate key performance indicators, address any challenges or issues that arise, and adapt strategies as needed to ensure the success and sustainability of the partnership.

The above is just a starting point. In other articles Alex Steinberg shares more insights and practical guidance.

?

About the author:

Alex Steinberg has advised governments and 40+ multi-national Fortune 500 companies on five continents. He is currently working on government projects in Riyadh, Saudi Arabia. His recent assignments include developing the strategy & program to upskill current and aspiring real estate developers nationwide to do more/ better projects. Alex helped the Ministry of Municipal Rural Affairs and Housing (MOMRA) to help build a million homes for Saudi citizens. He also developed 30+ large initiatives & programs collaborating with different stakeholders across the Real Estate Ecosystem to help achieve Vision 2030.

Alex Steinberg has also helped the Ministry of Investment and other ministry deputyships attract more investors to Saudi Arabia’s real estate & construction sector. Alex also identified, analyzed and recommended key Chinese real estate developers for partnering on large design & construction projects in Saudi Arbia.

Connect with the Author:

If you work in Real Estate, Infrastructure or Construction as leader, engineer, program manager, functional expert, consultant, government advisor and/ or supplier, reach out to Alex Steinberg through WhatsApp at +966531824178 or email at [email protected]

?

Disclaimer:

All content is the author’s own opinion and does not represent his current/ past clients and employers in any way. The information is simply to share thoughts and open dialog for discussion.

?

?

?