Sustainability Partnerships: Profiling Recent Deals and Deal Structures

Sustainability partnerships often are wrapped in a twine of financial, commercial, and operational flows and interactions • They may be a lifeline or a noose.

December 2021 — In the last 24 months, the volume of sustainability joint ventures and partnerships has mushroomed, up more than threefold from 2018-2019. Such deals often bring together a large international player and an earlier-stage company with a state-of-the-art sustainable technology or process. These partnerships improve the image of the large company and help it to achieve its sustainability commitments – and, potentially, help launch new high-growth sustainability-focused businesses. For the smaller company, the partnerships often bring needed funds and provide a loud market signal demonstrating proof of concept. They also may provide the smaller firm with access to complementary technical capabilities, and an ability to secure world-scale manufacturing facilities and expertise or to tap into sales and marketing muscle to reach a global market.

Sustainability deals are often structured to include all sorts of commercial and operational flows between the partners. The flows might include technology or other licenses, raw material or components supply, shared-use assets, secondments of staff and integrated teams, and agreements for one or more partners to provide services to the venture on a fee or no-fee basis.

Consider Hyvia, a 50:50 JV between Renault Group, the French automaker, and Wall Street darling Plug Power, a U.S.-based, leading hydrogen fuel cell developer. Hyvia is bringing to market an integrated hydrogen product and service offering for light commercial vehicles, such as delivery vans. Specifically, the venture will supply vehicle makers and their end-users with fuel cells, recharging stations, green hydrogen supply, and maintenance and fleet management. Hydrogen vehicles are a form of electric vehicles that relies on a fuel cell to transform hydrogen into electricity on board the vehicle, thereby increasing its range. Plug Power will contribute the key hydrogen and fuel cell technology to the venture. Renault will provide access to its staff and facilities to perform engineering, development, manufacturing, fuel cell integration, and assembly of hydrogen refueling stations on the JV’s behalf. It’s a classic interdependent joint venture.

Or consider PlantPlus Foods, a JV between Marfrig and Archer-Daniels-Midland (ADM) to develop and sell plant-based food products across North and South America. Brazil-based Marfrig, the world’s second-largest beef producer and largest producer of beef patties, will own 70% of the venture. ADM, a U.S.-based global food processing, commodity trading, and nutrition company, will hold the remaining 30%. ADM’s expected contributions to the venture include its supply of plant-based proteins and natural ingredients and flavors, application development, and technical expertise. For its part, Marfrig will be held accountable for the production of the final product, and all distribution and sales through its retail and food service channels. While the two firms have previously collaborated to produce plant-based foods in South America, this venture significantly increases the scale of their partnership, with the aim to serve customers across the western hemisphere.

Given such interdependencies, it is crucial that companies consider how best to contractually structure and manage commercial and operational flows. Owner-provided services are one particularly nettlesome flow, as they introduce all manners of potential risks, conflicts of interests, and asymmetries between the parties. Ankura has recently performed extensive benchmarking and analysis of owner-provided services with the various strategic, contractual, and governance considerations distilled in “The Codependency of Joint Ventures: Designing and Managing Owner-Provided Services in JVs”.

Given the increasing volume of sustainability partnerships and the focusing lens of the recently concluded COP26 summit in Glasgow, these deal structures take on even greater importance. As the world increasingly pivots towards sustainable alternatives, whether in the sphere of energy, transport and mobility, food and agriculture, or other domains, partnerships between smaller sustainable technology providers and established international players that provide capital, capabilities, and reach are only going to grow in number and importance. Understanding how to structure and manage such flows will be essential to large and small companies alike.

© Copyright 2021. The views expressed herein are those of the author(s) and not necessarily the views of Ankura Consulting Group, LLC., its management, its subsidiaries, its affiliates, or its other professionals. Ankura is not a law firm and cannot provide legal advice.

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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.

Edgar Elliott

Edgar Elliott is a Senior Associate at Ankura based in New York. He works across the joint venture and partnerships landscape, from advising on joint venture transactions, through to performing governance reviews of joint ventures and reviews of companies’ JV portfolios. He has worked with companies in various geographies, including in the Middle East, Europe, and the Americas, and across different industries, including the oil and gas, healthcare, aerospace and defense, and semiconductor sectors. Edgar holds degrees from Columbia University in Chemistry and in Classics.


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