CHAPTER 5
Parties to the JV: The Selection J V , the parties should engage in preliminary activities that can be of tremendous importance in properly structuring the deal and ensuring that their objectives will be incorporated into the JV documentation. Although the importance of each step depends on the transaction, consideration should always be given to the means by which reliable JV partners may be located and evaluated, and to the initial exchange of information between the parties to determine whether a basis for a relationship actually exists. An essential part of this process is the signing of a Confidentiality Agreement (see Chapter 7).
BEFORE ENTERING INTO A
Locating Potential JV Partners Much time and effort is generally spent in locating appropriate candidates for a JV. On the other hand, an existing relationship can be built with a current supplier, distributor, or customer. Information about potential candidates can be solicited from experts in the area of interest, such as trade associations, chambers of commerce, investment and commercial bankers, lawyers, accountants, and independent consultants. Firms with complimentary strengths and needs can be identified by reviewing information in published reports, such as the periodic reports that may be filed with the United States Securities and Exchange Commission (SEC) and with similar regulatory agencies in other countries. Government organizations in many countries (e.g., Ministry of Commerce, Ministry of Trade and Industry) often serve as catalysts for foreign investment and JV transactions.
Due Diligence Investigation The preliminary exchange of information between potential JV partners is generally referred to as a due diligence investigation. It involves a review of each party’s business and affairs as a condition to consummation of the deal, and it is typically conducted by first obtaining publicly available information and next exchanging information made available by the potential parties. REVIEW OF PUBLIC INFORMATION
A preliminary investigation of information that is publicly available should reveal whether the potential JV partner is in good legal standing, has a good reputation among traders and consumers, has government or extended family connections, or has a long, stable, and profitable history. The public records that are available depend on the country’s regulatory laws and the organizational type of the potential partner’s entity. These records might include trade name and business registrations, trademark and patent registrations, credit reports, press releases, and tax, financial, and securities registrations. The usual practice is to employ an investigator, accountant, or law firm
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