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Joint Ventures and Partnerships in a Downturn

Companies will need every tool they’ve got to survive the downturn and rev up their businesses as the economy rights itself. They’ll have to rewire operations, reallocate resources, and in some cases reinvent business models.

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Shoring Up Existing JVs

Joint ventures are facing many of the same financial challenges—severe revenue shortfalls from fractured supply chains, curtailed operations, evaporating market demand, and frozen credit markets—as their owners and wholly owned peers. These new economic realities require both short- and long-term responses.

JV partners, boards, and management teams can use restructuring tools that aren’t available to wholly owned businesses, including:

  1. Raising capital in unconventional ways
  2. Reducing costs through synergies and new operating models
  3. Regearing financial ratios
  4. Assisting owners through buyouts and other means

Creating New Joint Ventures and Partnerships

New JVs and partnerships can also help companies navigate the economic crisis. They can be used to raise cash, secure cost synergies, or pursue lower-risk and more-capital-efficient growth. When funding is tight, such benefits make joint ventures and partnerships a popular alternative to mergers and acquisitions or organic investments.

Options include:

  1. Partial divestments
  2. Business consolidations
  3. Partnerships for capital-light growth

This article appeared in the September–October 2020 issue of Harvard Business Review

Companies will need every tool they’ve got to survive the downturn and rev up their businesses as the economy rights itself. They’ll have to rewire operations, reallocate resources, and in some cases reinvent business models.

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governance, transactions, joint ventures & partnerships, f-performance, f-distress, article, f-strategy, board benchmarking

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