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PwC warns of JV failure

PwC has warned businesses to better prepare for joint ventures (JVs), with half of all JVs failing to deliver on their objectives and two-thirds dissolving within two years.

News Michael Masterman 06 August 2014
— 1 minute read

Mike Sum, partner at the firm, said Australian businesses are not well prepared to enter a joint venture despite 43 per cent of Australian CEOs saying they plan to enter a JV or alliance in 2014.

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"How they fail tends to arise in the implementation process. Companies tend to start with a partner and not a strategy," he said.

"Differences between partners are fundamental to the rationale for alliances, yet those differences often also cause cultural friction, poor decision-making and open conflict."

Mr Sum said JVs have increased recently due to traditional markets maturing and major corporates seeking new sources of growth in overseas markets and new product areas.

"Rather than taking on the risks of going it alone, or of a full M&A into unfamiliar territory, companies are joining forces with complementary partners to accelerate delivery times and to benefit from their know-how," he said.

PwC partner Peter Mastos said too much focus is spent on the legal aspects of a JV.

Mr Mastos said that whilst the legal side of things is important, businesses should not neglect other aspects of a joint venture.

"Making sure everyone is working toward a common goal and building trust is more important. Sometimes, partners are too concerned with protecting their own interests, fighting for the largest share of the pie.

"Prospective partners should invest time to plan collaboratively at the outset, agree on shared objectives, start with an achievable, narrow focus, create trust and grow from there,” Mr Mastos said.

PwC warns of JV failure
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