Design, Bargaining, and the Law
The final stage of post-contract bargaining is termination of the joint venture, in other words, exit of at least one partner. Broadly speaking, termination provisions in a joint venture agreement generally fall into one of two categories. First, one or both partners may exit the joint venture while keeping the JV company in operation, preserving its value. Second, the partners may dissolve the JV company. The first of these categories has four variations: (a) conversion of the joint venture into one partner’s solely owned business, usually through a buyout of the other partner’s stock; (b) replacement of one partner through sale of its equity stake to a third party; (c) conversion of the joint venture into a third party’s solely owned business through M & A; and (d) sale of the JV company to the public through an IPO. When JV partners’ decisively conflicting interests prevent them from reaching an agreement, the joint venture may be terminated through compulsory exit by one of the partners.
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