Cross-border joint ventures

For companies seeking growth, particularly when entering new markets, joint ventures are often the best way to share risks and resources. Current political conditions mean that we are seeing a notable rise in restrictions on foreign investment and this may drive more joint venture activity. The value of individual cross-border joint ventures also continues to increase, making careful planning vital. Some key trends in joint venture activity are discussed below.

To help businesses navigate the legal challenges of international joint ventures, we have updated our Cross-border Guide to Joint Ventures. It now covers 26 countries from Australia to Vietnam, including, for the first time, Saudi Arabia. Contacts for each jurisdiction are provided in the Guide.

Key trends

Larger big joint venture deals

Over the last two years the average value of big global joint venture deals has continued to rise. Feeding into this trend is the rise in the use of consortium arrangements to carry out M&A activity. Our recent joint venture experience confirms these developments and includes advising Schneider Electric Industries SAS on a US$2.1bn joint venture with Temasek Holdings to acquire India’s Larsen & Toubro Electrical & Automation business.

Sectors favouring joint ventures

The emergence of FinTech is set to add considerably to financial sector joint venture deal activity over the next few years. Key factors to balance are the need for collaboration and anti-trust restrictions. Other important sectors for large scale commercial joint venture activity continue to be real estate, for investment and development purposes, and infrastructure.

Venturing into new territories

For businesses seeking to expand into new or emerging markets, strategic alliances with local partners continue to make sound commercial sense. Asia remains the most active region for cross-border joint ventures, given the restrictions on foreign ownership rights in certain sectors in large emerging economies, such as the PRC, India and Thailand. Investments coming out of China are also frequently structured using joint ventures.

Linklaters Cross-Border Guide to Joint Ventures

As is well known, joint ventures pose their own challenges and when entering new countries there are pitfalls and traps for the unwary. Commercial issues are key, such as, choosing the right partner and building safeguards around valuable assets. Often it will be necessary to consider multiple jurisdictions.

Investors must also understand the legal environment and any particular challenges that it imposes. Our updated Cross-border Guide to Joint Ventures is designed to help businesses navigate the legal challenges of international joint ventures in 26 jurisdictions.