three possible JV
governance arrangement: full equality; policy equality, and lead parent
arrangement. Generally speaking, full equality gets the best from both
parents, while the lead parent form makes governance easier.
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The full equality arrangement
is essential for JVs that depend on both parents for continuing
substantial know-how inputs, such as technical, managerial or market
expertise, at policy and operating levels. It will also help produce the
best results from a JV that is closely tied to both parent's activities.
You should also use full equality in JVs with rivals, to ward off
of bias or a chance for operating imbalances.
The full equality arrangement usually requires equal ownership (50/50)
to make parents more willing to share decision-making, risks and
encourages both parents' know-how inputs at the policy level and is
easier to manage than the full equality form. If you don't expect
substantial, ongoing operating-level ties to both parents, and if your
firms are not rivals, then policy equality is easier to manage than full
The policy equality arrangement also
usually requires equal ownership (50/50).
Lead parent arrangement
is preferable when the situation does not call for equality in
governance which takes more effort. In such ventures, one partner
the JV while the other one has a voice and veto on designated matters.
Use this option to share the ownership and output of a production or
Negotiation DOs and DON'Ts