1

JOINT VENTURES THAT WORK

IDENTIFY INVESTIGATE INTEGRATE IMPLEMENT

“THE JOURNEY TO SUCCESSFUL JOINT VENTURES”

4200 Montrose, Suite 590 Houston, TX 77006(713) 522-9656 Phone (713) 522-9661 Fax

www.wjmurray-assoc.com

2

BENEFITS OF THE W J MURRAY & ASSOCIATES’ PROCESS:• Fewer False Starts• Shorter Cycle Times• Joint Ventures That Create Value For All Parties ( Or Don’t Do It)• An Organization To Accomplish The Joint Venture • Successful Approaches To Search For And Value Potential Partners• Proven Due Diligence Techniques• Effective Integration Techniques Manage The Conflicts•Effective Governance Models• Avoid The Pitfalls

LEADING TO: SUCCESSFUL JOINT VENTURES

IDENTIFY INVESTIGATE INTEGRATE IMPLEMENT

JOINT VENTURES THAT WORK

3

• Enterprise Strategy * The Customer, Vision, Goals, The Path Forward• Alternatives * Internal Development * Alliance * Acquisition • How Does Joint Venture Fit The Playbook?• Costs/Benefits of JV • Type of Alliance That Match Costs/Benefits * Cross Selling/Distribution * Joint Development * Supplier - Customer * Strategic Alliance * Joint Venture• Initial Screening Criteria• Partnership Executive Team (PET)

• Partner Selection Criteria * Strategic Compatibility * Commitment * Cultural Fit * Ability to Add Value Over The Long Term * Past History• Engage The Search Engine• Complete Initial Screening • Gain Consensus On The Short List• Complete Benefits Contributions Matrix If not balanced stop!• Clearly articulate what you want, what you won’t give up and what you will give up.

• Company Contact• Shared Business Plan• Understand each party’s expectation’s• Structure of Joint Venture• Operating Procedure * Metrics * Make It Work Provisions• Customer, Competitor, Regulatory Reactions• Risk/Reward Sharing Methodology

• Manage Employee Concerns• Harvest The “Low Hanging Plums”• Communication: Roles and Responsibilities• Staffing• Linking Budgets/ Processes• Driving Costs Out Of The Systems• Managing The Path Forward The “Scorecard”

THE JOURNEY TO SUCESSFUL JOINT VENTURES

IDENTIFY INVESTIGATE INTEGRATE IMPLEMENT

4

IDENTIFY

WHAT TO DO

•Confirm The Enterprise Strategy• The Business• The Vision• The Goals• The Competitors• The Value Proposition• The Critical Success Factors

• Gain Consensus That Joint Venture Is Better Than Acquisition/Sale, Internal Development or Strategic Alliance

• Demonstrate How The Joint Venture Supports The Critical Success Factors

• Strategic Alliance Versus Joint Venture

• Expectations - Contributions - Benefits

• Select Partnership Execution Team (PET) • Initial Screening Criteria

WHO DOES IT

Senior Managers

Senior Managers

Senior Managers

Senior Managers

Senior Managers

Senior Managers

Senior Managers & PET

OUTPUTS

• Internal Commitment

• Reconfirmation of, And Consensus For Partnership

• Decision on Strategic Alliance Or Joint Venture

• Expected Benefits/Costs

• Initial Selection Criteria

• PET Team membership

5

WHY JOINT VENTURE RATHER THAN INTERNALLY DEVELOP OR ACQUIRE?

FAVORS

FAVORSINTERNAL

DEVELOPMENT

COSTLOWER HIGH

TIME AVAILABLEFOR EXECUTION

SHORTER LONGER

NATURE OF ACTIVITYCOMPLEMENTARY CORE

VENTURE EXPERIENCE/EXPERTISE

HIGH LOW

AMOUNT OF CONTROLLOWER HIGHER

JOINT

VENTURE

IDENTIFY

6

CRITERIA WEIGHT

MOSTDESIRABLE

10 7 5 3

LEASTDESIRABLE

1

Market Access Geographic CustomersSales Revenue

Capacity

Profitability

Best-in-ClassIn Specific Strength

Quality ofManagement Team

Value CreationPotential

Reputation

SAMPLE INITIAL SCREENING CRITERIA

IDENTIFY

7

WHAT TO DO

• Partner Selection Criteria

• Engage The Search Vehicle * Customer/Supplier

* Business Network * Board Members * Law/Accounting firm * Banks * Business Network

• Complete Initial Screen

• Gain Consensus On Short List

• Second Phase Screen Based On Partner Selection Criteria

• Benefits/Contributions Evaluation

• Discuss With Management

• Memorandum Of Understanding

WHO DOES IT

Senior Managers & PET

Senior Managers & PET

PET

Senior Managers & PET

PET

PET

Senior Managers & PET

Senior Managers & PET

OUTPUTS

• Criteria For Ranking Candidates

• Consensus On Top Candidates • Advantages/Disadvantages Associated With Prospective Partner

• Alliance Costs * Management Time * Dollars, Other Resources

• Reaffirmation Of Purpose /Goals

• Commitment To Continue

INVESTIGATE

8

SAMPLE SECOND-PHASE SCREENING CRITERIA

CRITERIA WEIGHTMOST

DESIRABLE10 7 5 3

LEASTDESIRABLE

1Size

Technology Synergy

Product Synergy

Competitive Synergy

Market Access

Cost Position

Financial Performance

Patents, Technology

Know-How, Expertise

Sales/Marketing Synergy

Supply Chain Synergy

INVESTIGATE

9

SAMPLE SECOND PHASE SCREEN: COMPATIBILITY AND CULTURAL ASSESSMENT

GOALROI GROWTH

STRATEGYCOST QUALITY INNOVATION

DECISION MAKINGPLAN CRISIS

COMMAND CONSENSUS

ENVIRONMENTAL/OSHARECORD

GOOD POOR

ORGANIZATIONSTABLE HIRE/FIRE

TEAM BASED INDIVIDUAL EXCELLENCE

INVESTIGATE

10

WHAT TO DO

• Complete Negotiations

• Sign Joint Venture Agreement

• Create Shared Business Plan

• Agree On Structure of JV

• Agree On Exit Provisions

• Align Operating Procedures/ Metrics (Balanced Scorecard)

• Address Customer/Competitor Regulatory Concerns

WHO DOES IT

PET

Senior Managers

PET

Senior Managers & PET

PET

PET

Senior Managers & PET

OUTPUT

• Joint Venture Agreement

• Business Plan

• Joint Venture Structure and Governance

• Metrics For Tracking Performance

• Clarity Of Contributions And Benefits

INTEGRATE

11

WHAT TO DO

• Internal Communication * Scope Of Alliance * Expectations * How It Will Work

• External Communication * Customers * Suppliers

• Staffing * People * Rotation Schedule

• Linking Budgets / Process To Alliance

• Managing “The Path Forward” * Meeting Schedules * Processes

• Building Trust

WHO DOES IT

PET

Senior Managers & PET

Senior Managers

Senior Managers & PET

PET

Senior Managers & PET

OUTPUT

• Integrated Alliance * Direction * Commitment * Metrics in Place * Budgets * Key issues Defined * Roles and Responsibilities Defined* Expectation are clear

IMPLEMENT

12

IMPLEMENT

SAMPLE ELEMENTS OF BUILDING TRUST

HIGH TRUST LOW TRUST

LEADERSHIPSHARED UNILATERAL

COMMUNICATIONFREQUENT OCCASIONAL

FACE-TO-FACE ARMS LENGTH

PROBLEM SOLVINGROOT CAUSE SUBJECTIVE,QUALITATIVE

TOP MANAGEMENTVISIBLE SUPPORT

HIGH LOW