Joint VentureA joint venture is a business establishment that is created by two or more parties. The two parties have shared ownership, shared returns and risks, and shared profits and losses.
In other words, a joint venture happens when two individual businesses join hand together as one business. The businesses must sign a joint venture agreement that specifies all the important narratives and rules and regulations through which the joint venture will function.
Features of Joint Venture Business
- Helps in the creation of synergy
The collaboration of the two different parties or businesses brings together all the ideas, strategies and like – minded individuals. By working together, the joint venture business obtains many advantages that could help create quality products or services.
- There are separate laws
There are no separate rules and regulations as both the businesses merge and become one.
- Equal distribution of Profits and losses
All the losses are incurred by both businesses. On the other hand, any profit that is earned by the joint venture business is shared equally by both the businesses.
Advantages of Joint Venture Business
- Economies of Scale
- New market access
- Lower costs of production
- Creation of a new brand name
- Access to latest technology
- Increase in the efficiency of products
- Creation of innovative products
There are several benefits of two businesses coming together which is why many joint ventures take place.
Types of Joint Venture Business
- Basic Joint Ventures
- Affiliate Partnership
- Financing Agreement
- Vertical Joint Venture
- Project Based Joint Venture
- Republishing & Retargeting
- Functional Based Joint Venture
A Joint Venture Agreement refers to an agreement between two parties that mentions and clearly states all the rules and regulations that both the parties must follow during the course of the joint venture business.
Mergers & Acquisitions
Mergers and acquisitions are contracts through which the ownership of companies, business organizations, or their operating units are transferred or combined with other establishments.
Difference between Merger & Acquisition
A mergerhappens when the consolidation of two separate entities results in the creation of a new joint business.
On the other hand, an acquisition refers to the takeover of one entity by another entity.
Benefits of Mergers & Acquisitions
- Diversification of products and services
- Access to new distribution channels
- Reduction in the cost of production and distribution
- Increase in the purchasing power
- Helps in the reduction of competition
- Ease of research and development
Types of Mergers
Mergers are categorized into three major types –
- Horizontal mergersthat helps in increasing market share
- Vertical mergers which utilizethe current synergies and concentric mergers which expand the product offering.
Process for a successful Mergers & Acquisitions
- Identification of the market
- Identification of the possible businesses that could be considered for the amalgamation
- Evaluation of the strategic position
- Conduct due diligence
Mergers & Acquisitions Agreement
A Mergers & Acquisitions Agreement is a mutual contract between two businesses. The agreement states various statements and rules that must be followed by both the entities that are agreeing to join hands in the merger process.
Factors that affect business growth
Some factors that help in the growth of the organization are as follows –
- Customer loyalty
- Use of advanced technology at every step of the business
- Appropriate employee training
- Awareness of the market
- Keeping up with consumer’s tastes and preferences
- Leadership qualities
The growth and expansion of the business is essential after the business has been in the market for a long time. The growth of the business depends on a lot of factors all of which must be taken into consideration. The rules and laws must be placed in an effective manner before entering into a joint venture or mergers & acquisitions agreement and only then decision should be taken.