Should you buy each other — or just collaborate more closely? Sometimes the answer is neither a sale nor an acquisition, but a joint venture: a jointly owned company where both parties contribute and both retain their independence.
Short answer: In a joint venture, each party typically contributes capital, knowledge, technology or market access to a new, jointly owned company. The parties share risk, costs and gains according to an agreed distribution key, while their original businesses continue to exist and operate independently alongside it.
Access to a new market
A Danish business wanting to enter a foreign market can team up with a local partner who knows the market, instead of acquiring or establishing itself from scratch.
Shared risk in large projects
In a large, capital-intensive project — e.g. developing new technology — two businesses can share both investment and risk, instead of one party bearing it all alone.
Complementary strengths
One party contributes production capacity, the other sales channels or technology — together they become stronger than they are individually.
When you want to "test" the collaboration first
If the parties don't want to commit to a permanent combination, a joint venture allows the collaboration to be tested in a limited framework, before possibly moving on to something more permanent.
What needs to be agreed?
A joint venture requires a thorough agreement on ownership shares, management and decision-making authority, distribution of profit and loss, what happens if the parties disagree (deadlock), and how the parties can exit the collaboration again. Many of the same principles as in a shareholders' agreement between multiple owners (currently in Danish) apply.
Joint venture vs. merger vs. acquisition
Where a merger or an acquisition permanently combines the businesses (or parts of them), a joint venture remains a limited, often time-bound construction alongside the parties' other businesses — a more flexible, but also more complex to manage, alternative.
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