As a player in innovative business sectors like telecommunications or biotechnology, you may have different companies lining up to work with you. There may be an entity with all the assets you’re looking for, yet you may be hesitant to rush into a relationship with one another without testing the waters first.
Pursuing a joint venture instead of a merger can allow you to test the waters to see how well you and your prospective business partner get along before entering into a more permanent relationship.
How do joint ventures and mergers differ?
There are many differences between joint ventures and mergers. Two companies cease to exist individually when they form a new one as part of the merger process. The two original companies that joined forces continue to exist and operate independently of one another as part of the joint venture. Many companies looking to join forces through a merger appreciate being able to test the waters, joining together in a very limited scope, as part of a joint venture.
Joint ventures are created to be short-term, whereas mergers are permanent relationships. It shouldn’t come as a surprise that it’s easier to terminate a joint venture than it is a merger. Taking care of the latter might be quite disruptive to business.
Is trying a joint venture right for you?
If joining operations with another company is in the cards for you, you might want to better understand the pros and cons associated with joint ventures and mergers. A business litigation attorney can go over how you set one of these up to protect your interests and dissolve it should things not work out.