Sometimes a business may want the benefits of an M&A transaction, but for only a portion of its business, or otherwise isn’t ready or able to make a full commitment. An M&A-adjacent structure, like a joint venture (“JV”) or strategic alliance, which allows parties to pool specified resources and expertise and otherwise collaborate while preserving their autonomy, might be an attractive solution. Benefits and Risks JVs can be particularly helpful in situations where companies seek to enter new markets, share risks, or combine complementary strengths, but also maintain their existing businesses. For example, two companies may lack the necessary infrastructure or market knowledge to succeed independently in a new geographic region or in respect of new technological advancements. A JV might allow the companies to combine resources and expertise, providing more opportunities for scale or depth and leading to greater potential for development and a more competitive offering in the marketplace. This collaborative approach can be particularly useful in high-risk sectors such as technology, pharmaceuticals, and automotive development and manufacturing. For example, Rivian and Volkswagen recently established a technology JV focused on codeveloping an electrical architecture for electric vehicles that can be used by both parties, while each party remains independent with its own automotive manufacturing and sales operations. While JVs have become more common in recent years, they also come with significant risks, most notably as a result of cultural differences between partners that can create morale issues among the employee population, cumbersome governance, and the potential for one or more JV partners to lose interest in the subject matter of the JV. Before entering into a JV, it’s critical to think about when, and how, the parties would exit. A strategic alliance—a business arrangement where companies work together to achieve mutual objectives but do not create a new entity or combine any operations—can be lower commitment and lower risk than a JV. Strategic alliances are typically used when companies want to collaborate on specific projects— such as R&D or marketing initiatives—while retaining their independence and employee bases and are often used for shorter term initiatives. For instance, two tech firms might form a strategic alliance to jointly develop a new product, sharing resources like IP or expertise, but without the longer-term commitment of a JV or the complete commitment of an acquisition. Again, when contemplating a strategic alliance, it is helpful to consider how to exit. Structuring Considerations Parties seeking to benefit from M&A adjacent structures should consider the following: ▪ Compliance with antitrust laws (using clean teams and information-sharing restrictions where necessary). ▪ Clear and workable decisionmaking parameters (including board/committee votes, tiebreakers, and escalation mechanisms). ▪ Detailed and workable plans for long-term funding of the relationship (such as capital contributions, service arrangements, and emergency funding). ▪ Clear plans for employee retention, including equity compensation, if applicable. ▪ Thoughtful remedies if the collaboration fails or finishes (e.g., treatment of IP and exit rights). 8. M&A Adjacent Structures Joint Ventures and Strategic Alliances JVs can be particularly helpful in situations where companies seek to enter new markets, share risks, or combine complementary strengths, but also maintain their existing businesses. 18 Morrison Foerster
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