Joint Ventures and Partnerships in a Downturn

How to think about your existing collaborations—and the new ones you should seek out

by

and

David Ernst

by

and

David Ernst

From the Magazine (September–October 2020) · Long read

Susana Raab/INSTITUTE

Summary.

To make it through the downturn and return to growth, companies will need to rewire operations, reallocate resources, and in some cases reinvent business models. Joint ventures and partnerships can help many firms with those efforts.

In this article three consultants outline how companies can shore up their existing JVs through capital-raising, cost-reduction, and synergy-tapping techniques that often aren’t available to wholly owned entities. The authors then describe how parent companies can strengthen their own financial positions by using JVs and partnerships to make partial divestments, consolidate businesses, and collaborate on capital-light, low-risk growth initiatives.

JVs are already ubiquitous in sectors under pressure, like energy, and in innovative industries such as life sciences. At numerous firms, they drive a large share of earnings. Given that their returns have been climbing, their impact is quite likely to remain strong or even increase in the foreseeable future.

Idea in Brief

The Context

Joint ventures and partnerships will play an outsize role in corporations’ response to the recession and their plans for growth during the recovery that follows.

The Rationale

JVs and partnerships are ubiquitous in sectors that are under the most pressure (like energy and health care) and in innovative industries (like life sciences and tech). In addition, joint ventures and minority-equity investments are now outperforming wholly owned businesses and acquisitions.

The Benefits

Corporations can use existing ventures—and form new ones—to raise cash, reduce capital intensity, and cut operating expenses, and more important, as a cost-effective way to pursue promising new opportunities.

Companies will need every tool they’ve got to survive the downturn and rev up their businesses as the economy rights itself. They’ll have to rewire operations, reallocate resources, and in some cases reinvent business models.

A version of this article appeared in the September–October 2020 issue of Harvard Business Review.

JB

James Bamford (James.Bamford@Ankura.com) is a senior managing director at Ankura, where he serves a global client base across industries on joint venture and partnership issues. He previously founded Water Street Partners and co-led the joint venture and alliance practice at McKinsey & Company.
GB

Gerard Baynham (Gerard.Baynham@Ankura.com) is a senior managing director at Ankura, and was previously a partner at Water Street Partners.
DE

David Ernst (David.Ernst@Ankura.com) is a senior managing director at Ankura, where he works with clients across the globe, in all phases of the joint venture life cycle from deal making to restructuring and exit. He previously founded Water Street Partners and previously co-led the joint venture and alliance practice at McKinsey & Company.

New!

HBR Learning

Strategy Planning and Execution Course

Accelerate your career with Harvard ManageMentor®. HBR Learning’s online leadership training helps you hone your skills with courses like Strategy Planning and Execution. Earn badges to share on LinkedIn and your resume. Access more than 40 courses trusted by Fortune 500 companies.

How to develop a winning strategy—and put it to work.

Start Course

Learn More & See All Courses

Joint Ventures and Partnerships in a Downturn

Idea in Brief

The Context

The Rationale

The Benefits

Partner Center

Explore HBR

HBR Store

About HBR

Manage My Account

Follow HBR