Governance & Restructuring

10 Reasons Joint Ventures Fail

NOVEMBER 2021 – JV CEOs ASSERT they have the toughest job in business. And many operating executives confess they would choose exile in Siberia over a joint venture rotation. These attitudes are not surprising, especially given how often JVs fail to deliver on shareholders’ strategic, financial, or operational expectations. Ankura’s research on joint venture performance has consistently shown at least half of JVs fail on one or more of those counts. For example, two-thirds of JV CEOs report their owners are misaligned on long-term strategy and the annual budget, and just under half of cross-border JVs fail to meet the strategic and financial expectations of at least one partner. Even more sobering is that 31% of large, material joint ventures are terminated in the first five years. While some degree of failure is inevitable in business, JVs can also fall victim to other maladies created by their unique ownership structures. The good news: These maladies are generally preventable with proper planning and guidance from teams like ours.

Ankura has served hundreds of JVs and conducted dozens of research studies over the years, giving us a front-row seat to the multitude of creative ways that JVs implode and providing insight into how to inoculate against those outcomes. Our findings led us to 10 common causes for JV failures, ranging from misalignment on venture strategy to culture clashes to an inability to grow and evolve the JV.

Some of these causes are more likely to occur early in the life of the JV; others tend to emerge as the venture reaches middle age. Keeping these failures at bay requires focus across the venture lifecycle, putting the onus on dealmakers, JV board directors, and JV CEOs alike for diagnosis and treatment. The good news is that there are ways to keep these causes at arm’s length. For example, JV partners can avoid inadequately defined operational interfaces with parent companies by defining the JV operating model early and detailing JV-partner relationships so the economics and demands of such relationships are understood prior to venture formation. Similarly, JV partners can avoid over-valuing strategic objectives for the JV by developing a thorough and realistic business case prior to signing. See Exhibit 1 for a more complete list of how to combat common causes of JV failure and potential solutions.

Exhibit 1: Common Causes for Failure and Potential Solutions

Exhibit 1: Common Causes for Failure and Potential Solutions

© Ankura. All Rights Reserved.

Forming a risk-free JV is tough work and perhaps impossible. With these common causes in mind, dealmakers can be more confident in the future success of their JVs. For a deeper dive into the top 10 common reasons for JV failure and their solutions, read the complete article, Why Joint Ventures Fail, And How to Prevent It.

Have any questions? Contact our team at Ankura.

How We Help: Governance & Restructuring

We understand that succeeding in joint ventures and partnerships requires a blend of hard facts and analysis, with an ability to align partners around a common vision and practical solutions that reflect their different interests and constraints. Our team is composed of strategy consultants, transaction attorneys, and investment bankers with significant experience on joint ventures and partnerships – reflecting the unique skillset required to design and evolve these ventures. We also bring an unrivaled database of deal terms and governance practices in joint ventures and partnerships, as well as proprietary standards, which allow us to benchmark transaction structures and existing ventures, and thus better identify and build alignment around gaps and potential solutions. Contact us to learn more about how we can help you.

About the Authors

James Bamford

James Bamford is a Senior Advisor at Ankura based in Washington, DC. He joined Ankura with the firm’s 2020 acquisition of Water Street Partners, which he co-founded in 2008. Water Street Partners has been independently ranked as the number one global advisor on joint ventures since 2017. Prior to Water Street, he was global co-lead of the Joint Venture & Alliance Practice at McKinsey & Company.

Joshua Kwicinski

Joshua Kwicinski is a Managing Director based in Washington, DC. He has more than a decade of experience in advising on all aspects of the partnership lifecycle, including deal strategy, transaction structuring, ongoing governance, and restructuring/exit. He has advised senior executives and dealmakers at both a corporate and individual JV level across a range of industries, including oil and gas, metals and mining, aerospace and defense, financial services, biotechnology, and others.

Tracy Branding Pyle

Tracy Branding Pyle is a Managing Director at Ankura who specializes in helping organizations navigate complex transactions, and, in particular, joint venture-related transactions. She works with a wide array of U.S. and international companies across industries to help them structure, negotiate, approve, and launch joint ventures to set these ventures up for success. She additionally advises on governance of individual joint ventures and portfolios of joint ventures to help companies to minimize risk, increase efficiencies, and find value. Prior to joining Ankura, Tracy practiced law at Hogan Lovells, where she advised clients on joint ventures, public and private mergers and acquisitions, and corporate governance matters. Tracy is based in Washington, DC.


Leave a comment

Your email address will not be published. Required fields are marked *

Subscribe to the

Joint Venture Alchemist Newsletter

Sign up below to receive the latest joint venture updates from Ankura.

"*" indicates required fields