Why do a joint venture?

Why do a joint venture?

In the 2016 KPMG CEO Outlook study, 5 in 10 CEOs planned to create significant partnerships, JVs, or collaborative arrangements with other firms, making it the most popular form of M&A-type deal. This is not surprising, as we see their presence every day in the APAC region.

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So how do businesses rationalise the selection of a JV over another form? Well, businesses use all types of supporting theories to support their decision, with the three most common theories we've seen being: Transaction Cost Theory, Strategic Management Theory, and Economic Theory, or variations thereof.

In this issue, we look to explain the basis of these theories and who commonly uses them. We also highlight how these theories are best viewed as motivations in the context of joint ventures, and how they are just as important for deal makers to understand as joint venture design or execution.

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