Those who experience corporate partnerships are more likely to do it again

BY Fernando L. Mompó on 07 / 12 / 2014

The management consulting firm McKinsey&Company recently conducted a survey asking close to 1.000 corporate executives about the possibility of dealing with an M&A or a joint venture during the next five years. The results are quite conclusive: interest in corporate partnership grows quickly. And not just that: the more experience with joint ventures, the more that companies want to create another one.

In fact, 68 percent of respondents to McKinsey’s survey expect their companies’ joint-venture activity to increase over the next five years, and 59 percent expect an increase in M&A. On the other hand, the survey also shows that those who experience the benefits of a business or project based on collaboration with another company are the ones more willing to create new joint ventures. Nearly 90 percent of respondents at companies with more than six such projects in operation report that joint ventures are either frequently or occasionally considered as serious alternatives to M&A—compared with only 40 percent at companies with none at all. In conclusion: the more experience companies have with joint ventures, the more likely they are to use them.

This is not a surprise considering what the corporate executives respond regarding performance of joint ventures. Most describe the joint venture with which they are most familiar as a successful one. Respondents also report that more than half of their companies’ joint ventures met or exceeded at least one parent’s expectations. Specifically, a 30% considered the joint venture met or exceeded expectations for all companies participating in the collaborative business; a 23% answered it met or exceed expectations of at least one of the participants, 25% thought joint venture did not met expectations but somehow still benefited all parent companies; and just 19% reflected a case where expectations where not met and benefits were not delivered for any of the companies involved.

Besides these promising indicators, McKinsey&Company’s survey also reflect there’s plenty of room for improvement on the way most companies still manage their joint ventures. Most executives admit they don’t perform consistent management practices from one venture to the next; they tend to manage their partnerships individually, not using any standardized resources or methodology to enable consistency and not sharing best practices with the rest of the organization or other companies, and they lack consensus on the way to measure joint-venture performance.

Join ventures on the rise

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