This summer IBM and Apple announced a joint venture for the development and release of a business suite of apps.  Yesterday, they announced the first round of those apps.  According to the press release, what they are "delivering aims directly at the new quest of business—smart technologies that unlock new value at the intersection of big data and individual engagement."  The first apps target business solutions for air transportation, investment banking, insurance, government, and retail businesses.  Should you need more Kool Aid, it can be find at the joint venture website.

How can two monster companies like IBM and Apple put together a deal like this and manage it (isn't that just twice the bureaucracy?).   Well, actually, about the same way you would do it.  Okay, you'd probably have a shorter document and spend less than the GDP of a third world country on the legal fees to write it, but otherwise the same as you would do it.

You don’t need to be overly creative on your approach, just cautious:

The American Bar Association has published a good, fairly comprehensive checklist of issues to consider when putting together a joint venture.

What are some key considerations when you start to put together a joint venture?

  1. Will you form a joint company or have a written agreement governing the efforts of each company?  There are pros and cons to each.  Most two-party joint ventures can be accomplished with a written agreement between the parties without the added complexity of forming a new company. One exception is if the parties intend to take on outside capital, in which case forming a separate company creates a better vehicle.
  2. How do you get out?  Who buys out whom and at what price?  Will you have one party choose the price and the other party decide whether to buy or sell?  What if one party wants to sell to a third party and the other does not?  Will you let one party drag the other party along?  The clip above from Kelly's Heroes provides some good insights on the importance of getting out of a situation faster than you got into it!
  3. Will you limit each party from competing with the joint venture?  You may sleep better knowing that the other party is prohibited from competing in a geographical area, industrial field or channel of trade.
  4. How will the joint venture be governed?  With two venturers, how will you resolve a deadlock?  Is one venturer dominant?
  5. How will the steering committee operate?  You probably don't want two CEOs hashing out every little detail, but what will be delegated and what must be decided at a management level?
  6. Who owns any jointly developed intellectual property?  I beg you not to have it jointly owned.  Will one side own the jointly developed intellectual property but be restricted from using it except in the joint venture?  Typically companies will also want to use jointly developed intellectual property for their own separate businesses (so long as there is no competition!).
  7. What happens if the joint venture (read as one of the venturers) passes over a business idea?  Will the other party be permitted to proceed with it or would that be too distracting?

I highly recommend taking a quick read of the ABA checklist before you start putting together your next joint venture.

With the right incentives, planning and timing, even the most unlikely group can make a formidable joint venture!

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