FOCUS 28 More haste; less speed
So how can you ensure your JV is a ‘marriage made in heaven’? We consider there to be four fundamental areas to prioritise up front planning ahead of fi nalising an African JV, and recommend revisiting the approach to each area on a periodic basis (perhaps annually) in order to give the JV the greatest chances of success:
• Partner relations – Consider the trustworthiness and approach to your JV partner. Agree up front mechanisms that ensure productive, effective and open ongoing dialogue between parties, particularly around under delivery.
• Governance – Develop and agree a governance framework that mandates and enables the true, open sharing of relevant performance data, has regular forums for addressing evolving issues and practical (rather than formalistic) mechanisms for resolving confl ict when it arises.
• Complexity – Where possible, conduct detailed ‘what if’ scenario planning to uncover likely issues that may arise due to local complexities or uncertainties. Prepare mitigation plans and discuss and agree the types of remedial actions required of your venture partner.
• Performance – Aim to defi ne and agree what good performance looks like, up front, and invest in creating the expectations and values which drive good performance. Clarify performance objectives and weave into the governance structure protocols for dealing with under-performance. More importantly, take practical measures to make the JV ‘an island of excellence’, in a manner which resonates locally.
© 2014 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member fi rm of the KPMG network of independent member fi rms affi liated with KPMG International Cooperative, a Swiss entity. All rights reserved.
Investing time or effort upfront to address these challenges can be the difference between and success and failure of the venture. Appropriate due diligence, ‘what if’ thinking and practical planning for success may seem costly in the short term, but the returns in the long term are undoubted.
The key to assessing these issues is to work back from potential failure or under delivery scenarios, as though the risks had already manifested themselves. Rigorously track back through management to understand the types of problems that may occur and the potential root causes of each. Drafting the right JV agreement is naturally important. It is equally essential (and too often ignored!) to remember that considerable value and protection can be generated by building in early detection of issues, and practical recovery capabilities as well as clear exit mechanisms.
Marc van Grondelle Partner, Head of Joint Ventures KPMG in the UK T: +44 20 76944603 E:
marc.grondelle@
kpmg.co.uk
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