Discover New Opportunities With Joint Ventures & Strategic Alliances
In today highly competitive business environment, many construction companies are venturing into unfamiliar territory. Some are exploring opportunities across state lines or international borders. Others are branching out into different, larger or more complex projects.
For many contractors, particularly smaller ones, a joint venture or strategic alliance offers an opportunity to join forces with other construction companies to achieve business goals that one business couldn't achieve on its own.
Differences & Advantages
Joint ventures and strategic alliances have similar objectives, but they're structured differently. Typically, a joint venture involves formation of a new legal entity, such as a partnership or limited liability company (LLC). A strategic alliance, on the other hand, is simply an agreement between two businesses to pool their talents and resources. Both offer many advantages to the partners involved, including:
- Additional manpower without the need to hire,
- Access to new markets,
- Pooling of talent,
- Availability of specialized capabilities, equipment and technology,
- Ability to bid on larger, more complex jobs,
- Ability to spread risk among the members,
- Enhanced bonding and financing capacity, and
- Formation of new supplier relationships.
The most effective joint ventures and strategic alliances leverage members' complementary strengths. In cross-border or international ventures, for example, a contractor with specialized skills or experience might join with an out-of-state or foreign company that offers an established local presence, knowledge of the market, and on-site labor and equipment.
Due Diligence Required
Before embarking on a joint venture or strategic alliance, it critical to vet prospective partners thoroughly. If your business partner fails, you'll be responsible for completing the project. It also important to document the arrangement carefully to ensure that it has well-defined objectives, each party responsibilities are clearly spelled out, and both rewards and risks are fairly allocated.