8/19/2023 0 Comments Joint venture companies![]() ![]() ![]() That means the number of terminations during this economic dip is likely to be even lower. In addition, JVs’ returns on assets have been climbing recently-and are higher than those of wholly owned companies in the same industries. This may be partly due to the time it takes to negotiate a restructuring or an exit, as well as corporate management’s tendency to look first to wholly owned operations when cutting costs. Use of JVs also tended to rise on the eve of a recovery. Our analysis showed that in most industries, terminations of them didn’t always increase during downturns-and often fell. We recently analyzed trends related to joint ventures across the past 35 years. Moving forward, we expect the impact of JVs and partnerships to remain significant and, in some sectors and geographies, to increase. In 2019 Airbus, Celanese, Engie, Vodafone, and Volkswagen relied on noncontrolled JVs for more than 20% of their earnings, while at Coca-Cola, GM, and many others that figure was above 10%. JVs now drive a material share of companies’ profits as well. Other partnerships aimed at developing Covid vaccines have been announced by Sanofi and GSK, and by Hoth Therapeutics, Voltron Therapeutics, and Mass General Hospital. In March 2020, for instance, Pfizer and BioNTech announced they were teaming up to bring out a Covid-19 vaccine. In health care and life sciences, joint ventures and partnerships are crucial to innovation: More than two-thirds of new health insurance products in the United States are built on cobranded or JV offerings, while life sciences companies depend on such ventures to accelerate time to market and broaden distribution of lifesaving products. More than 50% of the largest assets in offshore wind and solar are structured as joint ventures-and such investments are a critical way for companies like Royal Dutch Shell, BP, Total, and Equinor to share risks, build capabilities, and meet ambitious targets to reduce greenhouse gas emissions. At these and other energy businesses, joint ventures are also key to managing the transition from fossil fuels to renewables. GM and Volkswagen, for example, each have several dozen, and JVs account for almost 80% of the upstream production of the largest international oil and gas companies. After all, in industries experiencing great pressure-like automotive, retail, and upstream oil and gas-joint ventures are quite common. They’ll have to rewire operations, reallocate resources, and in some cases reinvent business models.Īt many firms, joint ventures and partnerships will play an outsize role in those efforts, both as a vehicle for sharing costs and reducing capital needs during the crisis and as a way to position themselves for growth once it ends. Given that their returns have been climbing, their impact is quite likely to remain strong or even increase in the foreseeable future.Ĭompanies will need every tool they’ve got to survive the downturn and rev up their businesses as the economy rights itself. ![]() At numerous firms, they drive a large share of earnings. JVs are already ubiquitous in sectors under pressure, like energy, and in innovative industries such as life sciences. The authors then describe how parent companies can strengthen their own financial positions by using JVs and partnerships to make partial divestments, consolidate businesses, and collaborate on capital-light, low-risk growth initiatives. In this article three consultants outline how companies can shore up their existing JVs through capital-raising, cost-reduction, and synergy-tapping techniques that often aren’t available to wholly owned entities. Joint ventures and partnerships can help many firms with those efforts. To make it through the downturn and return to growth, companies will need to rewire operations, reallocate resources, and in some cases reinvent business models. ![]()
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