Design, Bargaining, and the Law
In deciding whether to establish a joint venture, each prospective partner should determine the total return it can realize by establishing the joint venture and identify the risks of the joint venture plan. In other words, each partner should individually ascertain the benefits and drawbacks of partnering with another. This chapter discusses those benefits in terms of synergies, while Chapter 2 discusses drawbacks in terms of opposing interests and risks. Immediately below, synergies are defined as the total return that partners can realize by participating in a joint venture. In the second section, 11 objectives of participating in a joint venture from the standpoint of synergies are discussed. Finally, in the third section, the topic turns to antitrust restrictions that JV partners may run afoul of in their pursuit of synergies. In the fourth section, we look at the basis for establishing a JV company to realize synergies instead of merely forming a contractual alliance. This book uses the term synergies to mean the total return that partner companies are able to realize by establishing and operating a joint venture. While the concept of synergies can have various meanings, it generally refers to economies of scope or, from a macro standpoint, social utility (e.g., benefits to consumers/workers, regional economic development) spawned by a synergistic alliance between two companies.
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