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KPMG International Survey Indicates Joint Ventures Fuelling Growth During the Downturn
Joint Ventures (JV) appear to be the vehicle of choice for achieving growth during the downturn; they are successful in delivering what is expected of them and are expected to feature even more frequently in the near future, claims a new survey recently undertaken by KPMG International and the IESE Business School.
Research amongst more than 100 senior executives, who were responsible for over 250 JVs among them, shows that 52 percent of respondents believed their recent JVs to have delivered everything expected of them, if not more. A separate KPMG survey last year showed that only 27 percent of M&A transactions actually enhanced shareholder value (“All to Play For”, KPMG International, October 2008), one of the key reasons for indulging in JV activity ahead of full-blown M&A thus becomes clear.
Joint Ventures (JV) appear to be the vehicle of choice for achieving growth during the downturn; they are successful in delivering what is expected of them and are expected to feature even more frequently in the near future, claims a new survey recently undertaken by KPMG International and the IESE Business School.
Research amongst more than 100 senior executives, who were responsible for over 250 JVs among them, shows that 52 percent of respondents believed their recent JVs to have delivered everything expected of them, if not more. A separate KPMG survey last year showed that only 27 percent of M&A transactions actually enhanced shareholder value (“All to Play For”, KPMG International, October 2008), one of the key reasons for indulging in JV activity ahead of full-blown M&A thus becomes clear.
On the JV front, 65 percent also felt positive about their future JV activity with 50 percent expecting to make more use of JVs in the near future. However, according to the report (entitled “Joint Ventures – a tool for growth during the economic downturn”), work still needs to be done in terms of perfecting the approach towards forming a JV, with 31 percent of respondents expressing dissatisfaction at how their own JV had worked out.
Sixty percent of the survey’s respondents felt legal due diligence to be a high priority, compared to 40 percent for financial and commercial due diligence and less than 10 percent for environmental due diligence. Other key survey findings included more than 60 percent of survey respondents who indicated that the most popular motivation for a JV is to gain access to new markets and more than 40 percent citing a desire to reduce costs by entering into a JV. Determining the partner’s contribution emerged as the key challenge while negotiating the JV. During the operational stage, this dropped down to the third-placed concern, supplanted in first place by having clear agreement on objectives.
Download the survey report here.
Sixty percent of the survey’s respondents felt legal due diligence to be a high priority, compared to 40 percent for financial and commercial due diligence and less than 10 percent for environmental due diligence. Other key survey findings included more than 60 percent of survey respondents who indicated that the most popular motivation for a JV is to gain access to new markets and more than 40 percent citing a desire to reduce costs by entering into a JV. Determining the partner’s contribution emerged as the key challenge while negotiating the JV. During the operational stage, this dropped down to the third-placed concern, supplanted in first place by having clear agreement on objectives.
Download the survey report here.
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