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Growing a business often means thinking bigger, bolder, and sometimes braver than you have before.
Achieving growth can come in many ways, but for some business owners that may lead to the idea of joint venture (JV).
Joining forces with another business to share resources, reduce risk and create new opportunities collaboratively.
It sounds like an obvious win, but without the right preparation, JVs can quickly turn sour, creating new risks and conflict.
That’s why it pays to go in with your eyes wide open and with the right advice behind you.
Why choose a joint venture
A JV lets you play to your strengths while leaning on your partner’s expertise. Together, you can potentially spread the financial risk, pool resources and gain access to markets that might otherwise be out of reach.
The structure is flexible too, from straightforward contracts to limited companies or LLPs, and there can even be tax efficiencies, particularly around Capital Gains Tax and Stamp Duty Land Tax in property-based ventures.
Combining resources not only means bringing together finances and people, but also the valuable intellectual property that sits behind your products and services.
Done right, a JV can help to accelerate your growth plans.
The pitfalls to watch out for in a joint venture
The reality is that more than half of JVs don’t last, with estimates ranging from 40 per cent to 70 per cent failing to meet objectives or lasting more than a few years, according to data from EY.
Why do they fail so often? It’s because partners head into the deal with different priorities, styles or visions for the future that aren’t sometimes communicated during the initial deal.
Without clear rules in heads of terms and the final agreement, disputes can flare over decision-making, profit sharing, or what happens if one party wants out.
Other JVs fail once important details are revealed post-deal, where poor due diligence is conducted. Undeclared debts or onerous legal obligations can sour a relationship quickly.
There’s also the risk of tripping over regulatory hurdles, such as competition law, or facing unexpected tax bills when assets are transferred.
Whilst all these risks are real, they are very manageable if you take the right steps during negotiations and the preparation of the necessary legal documents.
Questions worth asking
Before you dive into a JV, it’s worth asking yourself and your potential partner some tough questions:
Putting the right safety nets in place
If you do decide to go ahead, the next step is about protection. A well-drafted Joint Venture Agreement or Shareholders’ Agreement will set out voting rights, profit distribution, exit strategies, and dispute resolution processes.
Think of it less as red tape and more as a safety net – the clearer the framework, the freer you and your partner can focus on building the business.
From structuring the venture to drafting watertight agreements, our role is to protect your interests, spot the risks, and give you the confidence to grow on your own terms.
To find out more about our team’s experience of JV’s, please get in touch.
Director – Head of Commercial Department
My core area of expertise lies in investor buy to let properties and property refinance. I have worked with a wide range of clients to deliver the advice and support that they require.
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