JANUARY 2022 — Joint venture (JV) and partnership negotiations are a marathon, not a sprint. They typically take six to 18 months, and by the time a deal is signed, deal teams are exhausted, senior sponsors wonder what took so long, and all parties are left with little energy for the heavy lifting of setting up and launching the partnership.
There are several reasons negotiations take longer than expected. Corporate deal teams are often less experienced doing JVs, and JVs tend to be done on the side by executives already fully allocated to running the business. JVs and non-equity partnerships often involve resolving more complicated issues than a full acquisition – the parties not only need to agree on price and representations and warranties, but also must agree to many terms related to scope, exclusivity, intellectual property ownership, and the ongoing operation and governance of the partnership. Because JVs are less common than mergers and acquisitions (M&As), there is often a lack of benchmarks available on JV terms to help resolve disagreements on what is “market” or what terms should be included in the deal. Meanwhile, companies rarely use external advisors to help drive a disciplined deal process – relying solely on lawyers to help finalize a deal. While lawyers can endeavor to help clients navigate delicate negotiations, at the end of the day their duty of care prevents them from being neutral parties resolving issues.
Part of the problem is that effectively negotiating a partnership requires clearing answers to a variety of questions in advance. For instance, should a company negotiate exclusively with one counterparty or run parallel processes? How far should the parties advance joint business planning and technical feasibility studies before starting to negotiate contractual terms? Who should be in the room for deal negotiations, and what role should external advisors play? What negotiating tactics should a company use? What arguments should they bring to bear to convince potential partners of their views on key terms? These and other questions are not easy to answer.
HOW ANKURA HELPS
Ankura has extensive experience negotiating and structuring JV and non-equity partners transactions to help clients get to a “good yes” or a “quick no” – saving time, money, and headaches. Specifically, we assist with JV negotiations in two ways.
1. Negotiation Strategy. Ankura advises clients on how to maximize their leverage and get the deal they want done. This includes advice on what deal or terms to put on the table, when and how to negotiate, and who should negotiate (Exhibit 1). We also advise on the art of the possible – finding creative approaches or tactics to resolve seemingly intractable issues at the negotiating table. Our approach is grounded in meeting each partner’s core interests and working within each partner’s constraints to find a deal that works for all parties but still gives our clients the best deal possible. We leverage our proprietary databases, benchmarks on deal terms, analogous transactions, and diligence on how partners approach negotiations and deal terms to inform our advice and to give clients the tools and data to use during negotiations.
EXHIBIT 1: Negotiation Strategy
2. Negotiation Facilitation. Ankura facilitates JV and partnership negotiations. Unlike legal and other advisors who have responsibilities to a single client, Ankura can facilitate negotiations on behalf of all partners as a neutral third party; we can also do so while representing a single partner. As a facilitator, Ankura drives a disciplined deal process, preventing the downfall of many partnership transactions – lost momentum and delays in agreeing on a deal. Ankura further brings independent perspectives, decades of experience on JV and partnership deals, and benchmarks and data to the discussion to help resolve outstanding issues and develop creative solutions. Having a negotiation facilitator helps partners get to yes faster and with a deal that is based on best practice.
Having Ankura as a JV advisor to help you navigate JV negotiations and structuring can save you time and energy and get you to a better deal. Interested in learning more about partnership negotiation strategy or negotiation facilitation? Contact James Bamford or Tracy Pyle.