Utah is booming and many businesses are setting up offices in Utah. There are many large corporations who have recently moved to Utah. Utah is also home to a large number of small businesses. No matter what business you own, Sandy, Utah is the place to be if you are looking to grow your business. Utah’s business friendly policies have made it a magnet for new business. The Sandy’s local rules and regulations are also seen as pro-business.
Utah has come a long way since the days when mining was the main and the only industrial activity. Today the state is home to many large corporations and small businesses. There are also many corporate lawyers in Utah but choosing the right one is very important for your business.
If you are a business owner based in Sandy, Utah you will need the services of a corporate lawyer. The set of laws that govern the running of a business are referred to as corporate laws. Corporate laws are complex. Not every lawyer is well versed with corporate law. An experienced corporate lawyer can help you grow your business through strategic alliances and joint venture.
Strategic Alliances v. Joint Ventures
Strategic alliances feature less involvement between the alliance partners than joint ventures, which in turn are also a lesser commitment than a merger or acquisition. In a joint venture, two or more companies combine certain assets and work toward jointly achieving a business objective.
If we consider that a merger or acquisition is a combining of the resources of two different companies, then a joint venture is a different process that, to some extent, may achieve the same goals. The motives for joint ventures are varied, but the following list provides a few examples that often occur:
• Enhance research and development capabilities. A company, such as a pharmaceutical company, may enter into a joint venture with another business that has some specific capability that it needs to further its R&D process. On the other hand, the R&D capability may be so important that a company may want to “lock it up” and do an outright acquisition.
• Gain access to key supplies. Two or more companies may form a joint venture so they can have a better source of supplies for their production process. Such supplies could range from joint exploration for oil by petroleum companies to joint training programs for workers.
• Enhance distribution systems. Two companies may enter into a joint venture agreement that will enable one or both of them to have an enhanced distribution network for their products. One company could be a manufacturer of a product but lacks a distribution system, including an established sales force, that the other possesses.
• Gain access to a foreign market. International joint ventures may enable companies that operate in different countries to work together to achieve gains in one or more countries. Such international joint ventures are common in the automobile industry.
Regulation and Joint Ventures
Simply because two companies form a joint venture instead of doing a formal merger or acquisition, they are not exempted from some of the same regulatory scrutiny they might face if they merged or if one was acquired by the other. This is definitely the case for antitrust laws. The anticompetitive provisions of the Sherman Act and the Clayton Act can be also applied to joint ventures, where the effect of the venture on the market is to reduce competition. The cases of the Justice Department or the Federal Trade Commission challenging joint ventures are less common than their challenges of M&As. However, in theory the same laws look at the business combination and its impact on the degree of competition in the market. Keep in mind that when a company enters into a joint venture or a strategic alliance, it cannot be doing so to circumvent antitrust laws, and those laws still apply. Another point to remember is that if the antitrust authorities find a venture to be anticompetitive, it usually can be terminated at a lower cost than a merger or acquisition of a business that has been fully integrated into the parent company. Have a corporate lawyer by your side will ensure that you do not run afoul of the laws and regulations on joint ventures.
Restructuring and Joint Ventures
Sometimes a company may be able to pursue restructuring or a sell-off through the use of a joint venture. Consider a company that wants to divest itself of a division but is having difficulty finding a suitable buyer for 100% of the company that would provide a sufficient value to make the company sell off the division. One alternative would be to sell off part of the company and in effect run the division as a jointly owned entity. If the goal of the company doing the partial sale is really to be able to do a 100% sale, it may negotiate terms with the partial buyer, whereby that buyer would be able to purchase the remaining shares in the division at some point in the future based on the occurrence of certain events. Such events might be the division achieving certain performance goals. If this occurs, the seller would, in stages, have found its buyer. That buyer is able to utilize the capabilities of the business unit without, at least initially, having to do a 100% acquisition. If it buys control of the target, it may be able to enter into whatever agreement it needs while saving on the costs of a 100% acquisition. If it finds that the relationship is rewarding, it may then want to be a 100% shareholder and not have to share in the ownership of the company. The seller may also be able to add terms to the original agreement that state that if certain targets are met, the buyer is bound to complete the purchase and buy the remaining shares as of some date.
Potential Problems with Joint Ventures
Many potential problems can arise with joint ventures. They are certainly not a cure for all of the ills of M&As. This is obvious from the fact that we continue to do so many M&As, and if joint ventures were the solution, we would see more of them instead of M&As. The potential problems with joint ventures are as varied as the types of ventures. They may fail because the venture partners do not work well together. There may be disagreements between the participants, which may get in the way of accomplishing the venture’s goals. The venture may require participants to share intellectual property or other proprietary knowledge, and they may be reluctant to do so, or one venture partner may be using such information in a way that was not intended by the other venture participant. The participants may not see themselves as fully committed as they might if the activities of the venture were part of the overall business. This lack of full commitment may prevent the venture from achieving its goals. Other problems may be that the venture simply does not accomplish what it set out to accomplish. A corporate lawyer can ensure that your joint venture works smoothly.
Strategic alliances are less formal associations between companies compared with joint ventures. In a joint venture, a separate entity is often created, whereas in a strategic alliance the agreement and the relationship are less formal. We can define strategic alliances as collaborative efforts by two or more companies in which each company maintains its own independence. Such alliances are strategic when they are formed to facilitate the achievement of the company’s strategic goals.
Strategic alliances are common in various different industries, including the pharmaceutical, airline, and computer industries. Airlines that serve different geographic markets often form alliances or airline partner agreements. Under such agreements, they remain separate airlines but share routes. This enables them to be able to keep a customer who wants to fly beyond the range of a given airline’s routes. Each airline alliance partner can market the entire route, and the same flights may be marketed under different flight numbers for each partner. With such alliances, the various partners may be able to provide customers with a global network. In addition, as various companies in an industry form such alliances, this puts pressure on competitors to follow suit so they are not at a disadvantage because of a smaller network.
Governance of Strategic Alliances
When a company acquires another company, the governance process is hierarchical in the sense that the acquirer pays for and receives the right to control the target. It governs the target—hopefully in a manner that facilities growth of the wealth of the acquirer’s shareholders. The governance of strategic alliances is bilateral and is determined by the agreement the alliance partners enter into as well as by factors such as the nonlegal commitment of the alliance partners to make the alliance succeed. In entering into such an agreement, the alliance participants seek to lower some of the various costs that might exist if they had a looser arrangement. This does not mean that they will not have opportunities for strategic behavior. Depending on the type of alliance entered into, a significant degree of trust may be needed between the partners. If the success of the alliance requires that they share confidential information, then the parties must be confident that this valuable intellectual property will not be used inappropriately. If this proves to be a concern, it may inhibit the success of the alliance because the parties may be reluctant to share what needs to be shared in order to have complete success.
One of the reasons why companies enter into strategic alliances is to jointly benefit from specific knowledge resources of one of the partners. Often it is a situation where a smaller partner possesses specific knowledge and expertise that is valued by a larger company that may have the resources to transform this knowledge into profitable global sales. The expectation that alliances actually do lead to knowledge transfers between alliance partners is supported by empirical research.
One of the risks that smaller alliance partners face when dealing with a larger company is that the larger company may seek to take advantage of the knowledge it is receiving and may not fully share in the gains. One partner may use the knowledge to compete with the other in its own markets. If this is done in an unlawful manner, the smaller company is faced with having to pursue its rights in court, which can be difficult and costly.
If your business is considering a strategic alliance, speak to an experienced corporate lawyer. The corporate lawyer can explain to you the advantages and risks of your proposed strategic alliance.
Testing the Relationship
Strategic alliances can be a way for the alliance partners to test the relationship between the partners. The commitment level and costs are much lower than M&S and even joint ventures. If the alliance is not fruitful or if the cultures are not compatible, then the alliances are usually easy to terminate. However, if the parties are considering a more involved commitment, such as a merger, then an alliance may be a way to “test the waters.”
Why You Need a Corporate Lawyer
As a business owner considering a strategic alliance or joint venture, you are taking a big step towards growing your business. However a misstep here or there can be disastrous. A corporate lawyer can be of immense help when you are considering a strategic alliance or joint venture. A strategic alliance or joint venture is not a mere handshake between two businesses. There’s much more to them. Contracts have to be drafted and put in place to ensure that your rights are not harmed. With a corporate lawyer on your side, you can rest assured that your corporate lawyer will ensure that your rights are protected while you focus on growing your business. Don’t just choose any corporate lawyer in Sandy, Utah. Choose the right one for your business.
Corporate Lawyer Free Consultation
When you need a corporate attorney in Sandy Utah, please call Ascent Law for your free consultation (801) 676-5506. We want to help you.
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506