joint venture
Joint Venture [ ˌdʒɔɪnt ˈventʃə ] (literally “joint venture”) is an Anglicism that describes various forms of corporate cooperation between two or more partner companies. The term alone does not contain any information about the nature of the cooperation, even if the everyday business language usually means a joint venture with shared economic control. In parlance, the term is also often used when there is talk of direct investments by foreign companies in certain countries, which were or are only permitted there through the involvement of local shareholders.
A joint venture in this narrower sense is a joint venture between legally and economically independent companies in which the partners share management responsibility and the financial risk. An example of a joint venture in the German-speaking area is the toll operator Toll Collect, a joint venture between Deutsche Telekom , Daimler AG and the French Vinci Group .
development
The term comes from the US legal language. Especially after the Second World War, US companies were able to expand trade with other states by cooperating with partner companies abroad. For example, Kodak set up a joint venture with Pathé Cinéma in France in 1927 and , conversely, IG Farben founded a 50/50 joint venture with the Pennsylvania Salt Company in 1931 . Other export nations have followed suit. Today, many developing and emerging countries require regional partner companies to be involved in direct investments , so that the establishment of joint venture companies is not always voluntary. The establishment of joint ventures has become particularly popular in Eastern Europe and China.
Legal issues
Joint venture is a joint venture between legally and economically independent companies in which the partners share management responsibility and the financial risk. Legal science has identified three characteristics of joint ventures. The foundation of a joint venture is based on a common interest of the partner companies, which is expressed in a joint venture contract, in which profit distribution and joint control are also regulated. The legal basis of a joint venture is the joint venture contract that the partner companies conclude with one another. In it, the mutual interests and goals should be mentioned in as much detail as possible and the legal and economic relationships should be regulated. It is therefore the “script” for the business activities of the joint venture, must meet the formal requirements of the states concerned and take into account the necessary state approvals.
The partner companies can contribute a capital stake in the joint venture and / or means of production (contribution of tangible assets or raw materials) and / or labor and / or technical / commercial know-how (technology, property rights, marketing).
A distinction is made between the “contractual joint venture” and the “equity joint venture”.
In the "contractual joint venture", several companies work together on a purely contractual level without establishing a separate legal personality in which the joint business activities are bundled, so that regularly only one company under civil law according to §§ 705 ff. BGB or the applicable foreign law is present.
In the more common "equity joint venture", several companies set up their own company in which they participate. In order to avoid unlimited liability, the company is usually established as a corporation .
Motifs
State coercion
The establishment of a joint venture can be triggered by government compulsion to cooperate on direct investments in developing and emerging countries. With their legislation, these countries force investors to set up companies in their country only with the participation of regional partner companies.
competitive advantages
From a competitive point of view, joint ventures are especially important because you can control industry developments and achieve speed advantages over competitors. In addition, it is possible to react more quickly to increasing globalization . The costs for research can thus be borne jointly by those involved; Research can also be accelerated by working together and pooling knowledge. It may be that the entrepreneurial risk is too high for a single shareholder, or that the partners complement each other from a technical or entrepreneurial point of view, know-how transfer takes place, cost advantages are to be used or otherwise a lack of market access is made possible. If a partner brings in functions previously performed by a partner into a joint venture, it is considered outsourcing .
Strategic motives
The creation and use of synergies , technology transfer and the expanded possibility of diversification are seen as strategic goals . Another motive for setting up a joint venture can be the legal situation in a country. Some countries, such as the People's Republic of China, do not allow the establishment of pure (one hundred percent) subsidiaries of foreign companies in certain industries, in others only subject to official approvals. Joint ventures with local companies are often the only way for foreign companies to gain a foothold in the respective market .
species
Joint ventures are distinguished in particular with regard to the capital participation of the partners and the direction of cooperation.
- Equity participation : Equal joint ventures are characterized by identical participation rates (prototype: 2 partners with 50% each; three with 33.33% each, four with 25% each, etc.) Unequal joint ventures (60% / 40%) are in Strictly speaking, no joint ventures, since the focus here is on the investment motive.
- Cooperation direction : In a horizontal joint venture , the partner (s) are active in the same industry , in vertical joint ventures the partners are active on upstream or downstream stages of the value chain . If the partners come from related industries, there is a concentric joint venture , while conglomerate joint ventures consist of partners from completely different industries.
In addition, the literature on cooperation distinguishes between the “contractual joint venture” and the “equity joint venture”. While the “contractual joint venture” is merely a cooperation agreement without the establishment of a new company, with the “equity joint venture” the partners take on both management responsibility and financial risk.
Benefits and dangers
The partner companies pursue complementary or partially identical objectives, through which, however, temporarily occurring diverging objectives and changing interests cannot be excluded. Joint ventures can achieve economies of scope because complementary resources, skills and competencies are bundled. Also, synergies and economies of scale can be exploited in joint ventures. The capital requirement is reduced for the individual partner, which lowers the entrepreneurial risk. Even for partners who only bring know-how to the joint venture, there can be a learning effect (new knowledge of foreign markets, competitive mentality). You can secure entry into a foreign market (procurement or sales market) that would not be possible or would be difficult without cooperation. Joint ventures can therefore remove a (governmental or economic) market entry barrier.
Because of the lack of a capital majority, the partners are dependent on mutually coordinated action; Decisions require a great deal of coordination. In the event of a conflict, this can lead to lengthy negotiations and disputes. These disadvantages add to the instability of some joint ventures. The distribution of profits is usually provided according to the ratio of the capital shares. However, a risk can arise from the fact that the country in which the joint venture is domiciled later prohibits the distribution of profits to the foreign partner company ( transfer stop ) or even expropriates the equity stake . The following are therefore decisive for the establishment of joint ventures abroad:
- the degree of legal security ,
- the extent of direct government intervention ,
- the efficiency and reliability of the authorities ,
- the possibilities of profit transfer ,
- foreign import regulations .
The joint venture is the riskiest form of cooperation. The lowest risk (with increasing risk) are long-term supply agreements, license or franchise agreements, management agreements, contractual joint ventures and finally equity joint ventures. Strategic partnerships or mere cooperation agreements are less risky.
Accounting for JV investments
In principle , the parent companies worldwide have to include all subsidiaries in their consolidated financial statements regardless of their domicile ( Section 294 (1) HGB ); the consolidated financial statements are therefore a "world financial statement". However, joint ventures are generally not subsidiaries ( Section 290 (1) sentence 1 of the German Commercial Code (HGB)), as there is no uniform management and no controlling influence. Joint ventures are therefore to be included in the consolidated financial statements either in the context of proportionate consolidation ( Section 310 (1) HGB) or the equity method ( Section 311 , Section 312 HGB).
Since January 2014, the standards of the “consolidation package” of the IAS (IFRS 10, IFRS 11, IFRS 12, IAS 27 and IAS 28) have been adopted for use in Europe in accordance with EU regulation 1254/2012 of December 11, 2012 . According to IAS 11.16, a “joint venture” is a joint arrangement in which the parties who jointly exercise control of the arrangement have rights to the net assets of the arrangement. Shares in a joint venture pursuant to IAS 11.24 using the equity method for in accordance with IAS 28 as shares in associated companies and joint ventures enable , as far as the company is this standard, according to not exempt from the application of the equity method. A party that has an interest in a joint venture, but does not jointly control it, accounts for its share in the agreement as a financial instrument in accordance with IFRS 9 , unless it has a significant influence over the joint venture; in this case, it accounts for the investment in accordance with IAS 28 (IFRS 11.25). The joint venture is therefore also independent in terms of accounting law, has its own assets at its disposal, can incur debts, incur expenses or generate income; In addition, the joint venture is controlled by its shareholders by sharing the influence and a contractual right to the result of the joint venture is secured.
Economic considerations
International joint ventures are a special form of international direct investment . Of particular interest here is the role that international joint ventures play in technology transfer. Furthermore, the inherent instability of joint ventures, i.e. the sooner or later complete takeover by a partner in the majority of joint ventures, is a central subject of economic studies. It turned out that in joint ventures with US participation there were changes in the ownership structure in 52% of all cases examined, sales followed with 37%, while 10% of the joint ventures became insolvent.
Delimitations
If one of the partners does not assume any financial risk, there is a management contract; one of the partners does not have management responsibility, it is a participation .
Joint ventures - but not joint ventures in the narrower sense - include working groups and consortia , because they are only established for a limited period as pure special-purpose vehicles. Both are run in Germany as a BGB-Gesellschaft , which has a uniform group of shareholders and was founded for a specific purpose. Strategic alliances are furthest away from joint ventures because they usually do not lead to the founding of a joint company, but are exhausted in the coordination of common goals or strategies.
literature
- Harald Schaumburg: International Joint Ventures: Management, Taxation, Drafting Contracts , Schäffer-Pöschel, Stuttgart 1999, ISBN 3-7910-1325-4 .
- Kathryn Rudie Harrigan: Managing for Joint Venture Success , 1986 ISBN 0-669-11617-3 .
- Gilbert Probst , CC Rüling: Joint-Ventures and Joint-Venture-Management , 2001.
Web links
Individual evidence
- ^ Jiří Němec: Foreign direct investment in the Czech Republic . Mohr Siebeck, Tübingen 1997, ISBN 3-16-146702-7 , p. 14 ( limited preview in Google Book search).
- ^ Mira Wilkins: The History of Foreign Investment in the United States 1914–1945 , 2009, p. 249.
- ^ Jiri Nemec: Studies on Foreign and International Private Law , 2005, p. 8.
- ↑ Torsten Fett: Handbook Joint Venture , 2010, p. 213.
- ↑ Torsten Fett, Handbook Joint Venture , 2010, p. 240.
- ↑ Torsten Fett, Handbook Joint Venture , 2010, p. 234 f.
- ↑ Elfring: “Deadlock” at the equal equity joint venture, NZG 2012, 895
- ↑ Michael Kutschker / Stefan Schmid: Internationales Management , 2010, p. 890.
- ↑ Thomas Mellewigt: Management of strategic cooperations , 2003, p. 15.
- ↑ Anke Rasmus: Development of Cooperation Capability , 2012, p. 10.
- ↑ Michael Kutschker / Stefan Schmid, Internationales Management , 2010, p. 893.
- ↑ Michael Kutschker / Stefan Schmid, Internationales Management , 2010, p. 895.
- ↑ after Axel J. Halbach: Direct Investments in Developing Countries , in: IFO Schnelldienst , Issue 17/18, 1979, p. 65.
- ^ Rainer Bossert / Ulrich L. Manz: External company accounting , 1996, p. 269.
- ↑ Official Journal EU of 29 December 2012, L 360.
- ↑ Torsten Fett, Handbook Joint Venture , 2010, p. 97.
- ↑ Ralph Leonhardt, Foreign Direct Investment, Ownership, and the Transfer of Technology , Verlag Peter Lang, 2004.
- ^ Aimin Yan / Yadong Luo: International Joint Ventures: Theory and Practice , 2001, p. 228.
