Cross border Joint Ventures: Why strategic partnerships make sense in turbulent times

Why strategic partnerships make sense in turbulent times

For businesses looking to expand their capabilities or move into new or less familiar markets, forming a joint venture (JV) with another company—rather than entering the market through an acquisition or building new operations themselves from scratch—has long been an attractive option. Today, as multinational companies seek growth opportunities in an extremely volatile economic and geopolitical environment, the benefits JVs can offer become even clearer.

Against a backdrop of escalating trade wars and regional conflicts, forging a strategic alliance with a local partner in a particular country or in respect of a particular project can help multinationals mitigate the impact of tariffs, create resilience in supply chains, navigate challenges as they access unfamiliar markets and manage their capital expenditure. Here, we look at some of the key advantages and risks JVs pose, and what businesses looking to joint venture need to think about to ensure success and create long term value.

Why are JVs so attractive?

Joint ventures have proved popular during periods of economic turmoil before. According to BCG, during the post-Covid recession in 2020, JV activity increased by 6%, while M&A deal volumes saw an 8-10% fall.  The dynamics of 2025 may be different, with the threat of  tariffs and geopolitical turbulence as major drivers, as companies seek ways to minimise export and import duties, shorten or strengthen supply chains or overcome other trade barriers by leveraging local operations. However, the underlying rationale remains the same: their adaptable and capital-efficient nature and ability to share risk and expertise enables companies to pursue growth with reduced risk. 

In a global context, undertaking a JV can provide multinationals looking to move into markets where they do not have their own presence with the essentials they lack, pooling financial resources with their JV partner. They can leverage their partner’s local experience and market intelligence, access to customer bases or pre-existing operational capabilities and infrastructure on the ground. Meanwhile, the partner benefits from the multinational’s global reach, brand value, financial firepower, broad skills base and expertise. 

Joint venturing provides an opportunity to accelerate innovation and project delivery through collaboration. For larger, capital-intensive projects, such as energy or construction projects, multinationals can access the resources they require at scale in a faster time than building everything themselves. And by sharing in-depth knowledge, expertise, talent or intellectual property (IP) they can deploy in new markets, or develop new ideas, products, technologies or processes and shorten the research and development (R&D) cycle. 

Moreover, challenges that may seem daunting to a foreign company may not faze a local collaborator that is used to the business political, social or cultural climate in their country. Plus, by acting as a national or regional sponsor, local partners can also help to smooth over any resistance to multinational involvement in a particular market.

Flexibility is another major benefit. JVs can be tailored to suit specific requirements in terms of timeframes, locations or goals, and can evolve and change as the relevant economic, market or project conditions change. JVs can take many forms, from creating a new legal entity with shared ownership to contractual or licensing agreements. Likewise, JVs can be used in various situations, from project or time specific to open ended.

How to maximise success

Of course, partnering with one or more companies in a different jurisdiction is not without its challenges, and there are several important considerations to bear in mind before entering into a JV. These include:

Alignment of the parties’ objectives:

Businesses need to ensure that the commercial goals of the JV are clearly articulated and agreed upon, with key performance indicators (KPIs), deliverables and milestones set out in advance, so everyone is pulling in the same direction, and each partner is clear on how they benefit. This can be more challenging in countries where foreign companies are in effect required by law to JV with a local enterprise (due to foreign ownership restrictions) to be able to do business. In such cases, the local partners’ motivations, goals and contribution may differ from JVs where such legal obligations do not exist and where each party has a clearer role in the success of the venture.

Understanding what each party will bring to the venture:

Valuing the upfront and future contribution of each partner is critical, not just in terms of finance and assets, but also expertise, skills, goodwill and market relationships. This ensures each partner is playing their part and will be appropriately rewarded.

Due diligence:

Whether they are created for a particular project or as open-ended collaborations, JVs create a relationship between the partners and so it is essential that each conducts proper diligence on the other to identify legal, financial or reputational risk issues and ensure an alignment in terms of management style, and commitment to regulatory compliance. 

Structuring:

A variety of factors will impact the appropriate structure for each particular joint venture. These may include tax, local ownership requirements, foreign exchange restrictions and exit strategies. It is important that all these factors are identified at the outset and reflected to the structuring of the particular joint venture.

Ensuring clarity on financing requirements: 

As well as having clarity over how much initial capex will be required, it is essential to consider how ongoing capex, working capital financing needs, and contingency costs will be met. This will avoid surprises and potential disputes and help ensure that objectives can be achieved.

Agreeing the JV’s lifetime and exit options:  

Some JVs are designed to deliver a specific project, others may have a set timeframe, or they can be open-ended. It is crucial to establish at the outset what outcomes the parties want to achieve and when, and align on exit scenarios.

Working together to instil good governance: 

Due to their size and global footprint, multinational businesses are often held to a higher standard of governance and regulatory compliance than privately held local partners, even where that partner is itself a multi-billion business. Therefore, the JV may need to adhere to listing constraints or regulatory requirements that local partners are unfamiliar with. Education and training may be needed, and governance policies and procedures established for decision-making and oversight.

Having the difficult conversations: 

The establishment of JVs tend to be more friendly, collaborative and relationship-driven than acquisitions, but the JV partners still need to have suitable assurances and contractual protections in place, especially as personnel and circumstances will change over time. Agreements can be more flexible, less complicated and ‘lighter touch’ than in an M&A deal, but they must be robust, nonetheless.

Considering the 'what ifs':

There will be many unknowns ahead, but it is still possible to identify and prepare for potential changes that are reasonably foreseeable. The parties need to plan for eventualities such as macroeconomic or geopolitical events which might make the continuation of the JV impossible or no longer viable —for example, a major change in government policy, the imposition of sanctions or import/export bans, or, as happened in 2020, a pandemic.

Anticipate change:

The JV documentation should be regularly reviewed and refreshed to ensure it remains appropriate for today’s fast-changing macro landscape as well as any internal developments. To cope with any major new political diktats or regulatory duties, mechanisms should be created so it is possible to work through any issues and determine what will happen if an agreement cannot be reached between the parties or the JV needs to be terminated early.

Review and adapt:

Joint ventures are like living things — no two are exactly alike, and they will inevitably evolve over their lifespan. This agility is among their biggest plus points, especially during periods of uncertainty and upheaval, enabling partners to share financial risk in a way that makes sense for both partners and benefit from each other’s complementary capabilities and attributes. However, careful structuring and management is required to unlock the value they offer and ensure they deliver as expected for all partners, in any conditions.