Name: Structuring joint ventures and minority investments to improve their performance
Uploaded: 2025-03-25T16:27:47.000Z
Duration: 53 min 15 s
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One of the issues that has always provided complexity and challenge is in the structuring of partial deals, whether they be joint ventures, minority investments.

It's very easy when you have full control and you can cram down the brand or the culture or whatever the area is.

Much more complex, and we're certainly grateful to have this esteemed panel help us think through some of the really current issues and best practice in structuring joint ventures and minority investments, and pleased to have George Casey leading this discussion.

So we have a panel that actually represents a number of different industries, right?

So hopefully we'll draw on experiences in different industries on joint ventures and minority investments.

Andrew Gratz is from Lyondell Bissell, based in Houston, with a lot of experience in industrials, chemicals specifically, M&A and joint ventures in particular.

Darren Besson is based here in San Francisco, the general counsel of CBS Interactive.

So coming from the media, but as he would say, there is no true media without technology company.

So he will draw on his experience in that industry.

And Jako Sulander is head of legal M&A at Nokia, currently based in New York until two years ago was based in Espoo, Finland.

So bringing his experience on the technology side and also internationally.

So with that, maybe we'll quickly go into, in 50 minutes, talk about joint ventures.

We can spend an entire day or a week talking about joint ventures.

Maybe first, the four big themes that we were thinking we will cover, but we are happy to answer questions outside of those themes as well.

There is a lot of discussion as to what joint venture is.

And a lot of people put a lot of different things into what actually joint venture or minority investment is.

Because at the end of the day, it's actually one of the most, one of the broadest terms in M&A that probably exists.

Then we'll talk about some of the specifics, like governance, right?

We'll talk about relationship between shareholders and the joint venture.

And then we'll talk about exits, termination.

We'll try to pack it all within the 50 minutes that we have.

So maybe starting with the first kind of big theme and the big picture, what are joint ventures and why do people do them?

And Andy, if I can ask you, sort of what's the strategic imperative?

That question, I think, is key for each company.

There are a few standard reasons why you do a joint venture.

Maybe there are, you want access to sort of resources or sort of markets you otherwise wouldn't have access to.

You limited up front investment, risk mitigation, to sort of dip your toes in the waters for whatever reason.

And you're not fully ready financially, operationally, whatever, to go full throttle into a greenfield investment.

But the key for the first starting point is to figure out the why.

Because until you know the why, you can't effectively develop the how.

And so throughout this hour, we're gonna talk about the different ways joint ventures can be developed, whether it's simple collaboration, forming a new entity.

There are a variety of reasons, ways to form a joint venture.

But before you get to that point, and before you look at all the levers you can push and pull to get to the joint venture, you gotta figure out why.

And so those are a few of the reasons to proceed with a JV, if it makes sense, to advance your strategy.

And would you consider, for an industrial company like Landell Bissell Chemicals Company, would you pursue, would the company pursue joint venture more as a way to get into new market, get into new technologies?

Develop your business in some parts of the world that you're less familiar with?

What is the question to the why answer for Landell Bissell?

We, as a company, want to look at different markets.

And for regulatory reasons, or maybe we just have never really operated in those countries in the past.

We want to partner familiar with those markets.

Maybe a potential joint venture partner can, has a plant, or can provide certain feedstocks that we can use to develop our products.

Maybe we're just looking for certain channels to market that we are, that are not very developed, or we don't have a certain experience with.

In fact, historically, we've been on the other side of that.

Companies will come to us for our intellectual property, and we've formed joint ventures with them.

Here, we'll license you our IP, and then whatever is produced from that intellectual property, we will share together via a joint venture.

So all the reasons you just mentioned, George, we are actively looking at, either in the past or going forward.

Thank you, and in kind of media slash media technology, joint ventures versus minority investments, how would you look?

Why would CBS Interactive look at joint ventures, minority investments?

And again, similar to what Andy was saying, I'm now in a business that there's seven companies within half a mile of here who are trying to put me out of business tomorrow.

When you're in media, I think since I've been there for interactive for eight years, TV's been reinvented six times.

Thankfully, none of them have truly reinvented it yet, and I still have a job.

But there's new forms of distribution, there's new forms of content, there's new devices you can view it on.

And we have to try to figure all of that out at the exact same time.

TV went from an industry that didn't change for 70 years.

Effectively, it might have gotten into color and the TV's got bigger, but the form of content and the time slots that was in it didn't change, and the way it was monetized didn't change.

And that's over, and we have to figure that out.

Makes for, again, an exciting gig as a lawyer and a corporate development person, but it also makes it that somebody's trying to put you out of business tomorrow.

So we use it for all of the things, particularly of being a strong minority investor in something, in a brand new technology that we are not an R&D company.

We do a lot of R&D, but there are some things you can't try to figure everything out on your own.

So we will joint venture with people on different ways of distributing content, as in getting it from when it's being made to the device.

We'll partner with people on new forms of content, should there be six minute episodes of things.

And when you have different forms of distribution like we do now, and not just TV, but all access and streaming and OTT and DTC, and I can give you 32 other anagrams, that you have to try these things and try to figure out where your company is going.

And joint ventures or minority investments are a great way to do that without being over committed, and also without necessarily having to put your brand name when they're talking about before on something right away, because most of them are going to fail.

We live in a world where a lot of these new inventions, some will take, most will not, but you've got to try and figure that out and be one step ahead of people.

And as much as JVs, minority investments are extremely difficult and complicated and dangerous, because they do fail, they are a great way to experiment and try new things.

Now, when we talk about joint ventures, right, people often mean a physical transfer of assets, creation of a new legal structure, and that's how people often talk about joint ventures.

Now, looking at kind of broader term, right, joint venture may mean none of the legal structures, not transfer of assets, but partnership, right?

In this part of the world, partnerships is actually one of those forms of developing your business that's quite popular.

Jaco, do you want to talk about virtual joint ventures, so to say, when you actually, you are not co-owning, you don't have an equity interest in a particular legal set of assets in legal entities and legal group, but you are effectively cooperating through contractual arrangements.

I think one of the things that people too easily assume, and when they talk about joint ventures, is exactly that thing.

That you say, well, joint venture means this.

We have a standalone entity structure, and we're going to run the business through it.

I think it's super important to stop at that point and actually break it down into pieces and figure out.

Well, a couple of the things that you want to look at is, well, what's the balance sheet going to look like?

Is this actually going to be a standalone entity, or is it going to be contracting things from the parents, if you have a 50-50 joint venture, for example?

Is it a situation where it is a totally separate business?

Are you going to plan to IPO it, or are you going to plan to sell it?

Are you going to just plan to kind of run it as it is and figure out through some exit mechanism what happens to it?

Or does it have a more specific purpose for entering into the new markets, maybe it's a collaboration on a new product or something like that, where I've actually found that it is in most cases easier and simpler and far more appropriate to enter into, let's say, reseller agreements, joint development agreements, IP licenses and such, rather than create a particularly complicated structure with its own sort of tax issues and IT systems and what have you.

So, I would just say that you can collaborate in so many different ways that it would always be important not to go too far into thinking when you hear about, okay, we should do a joint venture with this and this company, that this is the form of it, the corporate form is the right form for it, but just try and break it into pieces and see how the business model works and whether a, let's say, you're going into a new market with your customer, you want to customize some products, maybe for that market, but you're probably only going to sell those products.