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MENA Joint Venture

Our company is about to enter into a JV agreement with a reputable MENA company to distribute our product. The agreement will be 70/30 with us being the minority and the entity will most probably be Dubai based/incorporated. I have scribbled 4 areas of interest that I want on the agreement. (1) Board representation (2) Audited Financials (3) timely monthly financial report submissions (4) audit capability by minority interest. Any issues I should be concerned about (as far as setting shop in Dubai) and anything I forgot or should include in the argreement?

Answers

Topic Expert
Linda Wright
Title: Consultant
Company: Wright Consulting
(Consultant, Wright Consulting) |

Participation in general counsel and vendor selections.

Topic Expert
Jim Quinlan
Title: CFO, Managing Director
Company: Trinity Group, BlueGold, Genergy, Wellco..
LinkedIn Profile
(CFO, Managing Director, Trinity Group, BlueGold, Genergy, Wellcount) |

How much control or info you want depends on how much you trust the entity.

Also, does the partner maintain inventory or do you ship directly? Makes a difference on control of sales and product.

Topic Expert
Tom Pai
Title: CFO consultant
Company: Sunstone Group
(CFO consultant, Sunstone Group) |

Think through the most important issues, most important decision you anticipate. Have and agreement on these topics and incorporate them into the JV agreement.

Also, MUST include mechanism for how to unwind or dissolve the JV. Everything is rosy now, but needs may change, the world may change. Both of you need to think through how to end the relationship.

Anonymous
(CFO) |

Linda,Jim, Tom... thank you for the inputs and will surely raise the issues/items with my CEO.

Jim...this much detail (inventory/shipping) has not yet been discussed but the indication is that they are willing to go straight arms length deal with us (meaning they will maintain inventory that they purchase). A hybrid model may also be on the table to save on shipping costs. The group will be arriving next week in the US to iron out the details and hopefully close the deal. Personally, if they will pay up for the inventory, I don't have any "control" issues. They are a reputable big firm so it is not so much a "trust" issue...however, I want to cover our asses just in case (if that makes sense). Besides, I think it is just the prudent thing to do.

Also worth noting that they REALLY want our product and they KNOW (having installations and maintenance contracts themselves) that there is a great demand for it. We have some leverage as far as negotiations goes but as in all negotiation, it is a balancing act between getting what you want and signing on the dotted line.

Topic Expert
Keith Perry
Title: Consulting CFO and Business Operations A..
Company: Growth Accelerator
(Consulting CFO and Business Operations Advisor, Growth Accelerator) |

What I don't see here is "why the JV, and how to profit from the JV". You'll likely get customer information by default (after the fact).
If there is real-time intelligence that is important, I'd call that out.
Also, if there are dividends or other benefits, I'd call out how they're calculated.

Anonymous
(CFO) |

Keith, we have decided (or want to) to partner up with the company because they already have market penetration and name recognition in the region. They are well known, know the market, have contacts, have their own installations and managed facilities. We sell them (the JV) the equipment at the same distributor price and they can sell the equipment at the prices they think they can sell them. We maintain our margins here...and still get a piece from the distribution side margins. We decided against setting up our own offices because we know that it will take some time to get traction. And I agree with you that income distribution details/particulars need to be ironed out.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

That business model is what I call a distributor plus. Its a good model, for all the reasons you stated plus the fact that you don't really have a capital outlay or downside (save normal business risk of selling inventory and either getting high rates of returns or not paid).

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