CHAPTER 9
Negotiating the Joint Venture Terms all relevant legal and business considerations regarding the possibility and desirability of a JV arrangement, they must focus on the formation of the venture and negotiation of the key economic and legal terms of the relationship. There is no standard negotiation method. In some cases, the parties may exchange informal written proposals before final face-toface meetings are conducted. In other situations, the parties may gather together to work out the terms in one lengthy session. Although the parties can actually draft all of the substantive documents relating to the JV during the negotiation process, it is more likely that the negotiators will limit their discussions to the important terms and concepts and leave the detailed drafting to the respective counsel of the parties.
AFTER THE PARTICIPANTS HAVE IDENTIFIED
Key Terms of the Joint Venture Negotiations should start with establishing the primary concepts and features of the JV arrangement, leaving specifics for a later stage, because the details tend to be numerous and even overwhelming. Parties who have come to the point of negotiating a deal should have sufficient trust in each other to concentrate on the essential, major points of their JV arrangement on the assumption that the details will be worked out and won’t be breaking points. For the parties to proceed with a JV, they need to reach agreement on each of the following key terms and issues: The first issues for discussion are the business and financial objectives of the JV and the activities that need to be conducted to achieve the objectives. For example, the objective of the JV might be to market and distribute a particular product in the local party’s home country. If so, the JV activities will certainly include distribution, and may also require the manufacture of a sufficient volume of products to meet the needs of the market.
■ OBJECTIVES AND ACTIVITIES
Each party will be expected to make certain contributions to the JV. One or both parties may provide cash to fund JV operations. In addition, the parties will likely deliver other tangible and intangible assets, including equipment, raw materials, labor, intellectual property rights, and technology.
■ CONTRIBUTIONS
As with any other new business, consideration needs to be given to the day-to-day management of the JV, and the procedures to be followed in connection with major decisions regarding the business and strategy of the JV. Initial directors and officers of the JV should be identified. Dispute resolution mechanisms should also be established before the JV is formed and organized.
■ MANAGEMENT AND CONTROL
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