collaboration. -...
TRANSCRIPT
Cross-border joint ventures
Collaboration.
For companies seeking growth opportunities, particularly when entering new markets, joint ventures are often the best way to share risks and resources. The value of individual cross-border joint ventures being entered into is rising, making careful planning all the more vital.
In this article we take a look at what sectors are most commonly using joint ventures and the regions most popular for cross-border joint venture activity. Our cross-border guide to joint ventures looks at key legal issues such as investment restrictions, shareholder veto rights and enforcement across 25 countries, from Australia to Vietnam. Details of how to access the guide are set out below.
Sector 2008 2009 2010 2011 2012 2013 Grand total (US$m)
Energy and utilities 21,269 3,190 9,148 12,060 11,165 8,642 65,473
IT, Bus. services and media 5,722 33,918 783 309 1,274 305 42,311
Investment managers 9,177 79 532 561 154 11,843 22,347
Real estate 3,150 4,215 1,251 3,616 3,172 3,381 18,784
Mining 753 1,435 4,137 3,505 2,559 2,709 15,099
Food and beverages 1,424 5,258 2,193 1,832 187 8 10,902
Chemicals 482 6,602 403 44 8 727 8,267
Telecoms 3,357 38 565 193 102 3,500 7,755
Infrastructure and transport 209 1,084 3,449 436 1,069 1,314 7,562
Industrials 292 84 74 441 3,979 843 5,713
Ten most active sectors measured by value over period 2008-2013. Source: Thomson Reuters.
Joint venture deals by value. Source: Thomson Reuters.
60,000
50,000
40,000
30,000
20,000
10,000
2008 2009 2010 2011
Joint venture deals, 2008-2013
Dea
l val
ue U
S$
m
2012 20130
Fewer, but bigger, joint venture deals
As can be seen from the chart opposite, there has been a steady increase in the total value of joint venture deals in the last three years. At the same time the number of deals has been falling meaning that the average deal size has increased significantly. Last year saw the average deal size at US$282m, the highest it has been since the start of the crisis in 2008. This may be due to businesses once more setting their sights on higher growth amidst promising signs of economic recovery.
Sectors favouring joint ventures
Measured on a value basis, the energy and utilities sector has been the most active user of joint ventures, with total deal values of over £65bn since 2008, representing over 30% of total deal values in the period. It was knocked off its perch last year by the investment management sector, but that was attributable to one exceptionally large joint venture. As can be seen from the chart opposite, the mining and real estate sectors have also remained relatively constant users of joint ventures as a means of developing their businesses.
Key contacts
Anna StylesPartnerTel: +44 20 7456 [email protected]
Joanna HealeySenior AssociateTel: +44 20 7456 [email protected]
Bernice DunsmuirSenior AssociateTel: +44 20 7456 [email protected]
GC
22
27_F
/03.
14
linklaters.com
This communication is confidential and may be privileged or otherwise protected by work product immunity.
Linklaters LLP is a limited liability partnership registered in England and Wales with registered number OC326345. It is a law firm authorised and regulated by the Solicitors Regulation Authority. The term partner in relation to Linklaters LLP is used to refer to a member of Linklaters LLP or an employee or consultant of Linklaters LLP or any of its affiliated firms or entities with equivalent standing and qualifications. A list of the names of the members of Linklaters LLP together with a list of those non-members who are designated as partners and their professional qualifications is open to inspection at its registered office, One Silk Street, London EC2Y 8HQ or on www.linklaters.com and such persons are either solicitors, registered foreign lawyers or European lawyers.
Please refer to www.linklaters.com/regulation for important information on our regulatory position.
Venturing into new territories
For businesses seeking to expand into new or emerging markets, strategic alliances with local partners make sound commercial sense. Looking specifically at cross-border joint ventures, Asia, and in particular China, has now returned to being the most favoured destination.
It’s not just the commercial rationale that drives joint ventures in certain foreign markets. In some countries such as China, the United Arab Emirates and Thailand, for instance, there are restrictions on foreign investors having 100% ownership rights in certain sectors, meaning that joint ventures may be the only avenue available for new entrants to certain markets.
Cross-border joint ventures by target region. This graph shows each region’s share of the number of joint venture deals globally each year. The numbers in the bar show the number of individual JVs per year. Source: Thomson Reuters
60%
70%
80%
90%
100%
50%
40%
30%
20%
10%
2008 2009 2010 2011 2012 20130%
128
44 6738
4229
17
17 46
44
28 6
10
15
31
18
8
2
1530
2836
22
14
35 15 23 21 1214
W. Europe
N. America
EEMEA
C&S America
Asia
Cross-border joint ventures by target region
Linklaters’ cross-border guide to 25 jurisdictions
However, as is well known, joint ventures are not without their own challenges and when entering new countries there are pitfalls and traps for the unwary. Some of the pitfalls are commercial: choosing the right partner is critical, and building safeguards around valuable assets, particularly intellectual property, are key. Some are about understanding the legal environment and the challenges they impose, such as South Africa’s rules on minimum levels of black ownership for certain sectors.
To help businesses navigate these legal challenges, we have published our cross-border guide to joint ventures. The guide is available from our Knowledge Portal, a one stop shop of knowhow reserved for our clients giving quick and easy access to our published knowledge and learning from around our global network. If you are a client and have not yet registered for the Knowledge Portal, signing up to it is simple. You can set preferences by areas of law, jurisdictions and business sectors and choose to receive updates, daily, weekly or monthly. You can also search through thousands of published items. To access the sign-up page, click here.
Contacts
At the back of the guide you will find local contacts for each jurisdiction. If you have any comments or questions on this article please contact Anna Styles, Joanna Healey or Bernice Dunsmuir.