‘We Knew We’d Recover’: Advice on Revitalizing JVs in Tough Times

‘We Knew We’d Recover’: Advice on Revitalizing JVs in Tough Times

There was a time you couldn’t talk to an oldster without hearing about the Depression: it made an impression on them.

Consider my parents, my uncles and aunts – I had plenty of years to hear their stories. Born in the parlous ‘teens, childhoods in the rough 1920s, things were looking up, sunny in the money, when down she plunges – the Crash. Now, they had a thing called a depression, the Great Depression, with no hope in sight.

Yet they never lost hope: it’s what they all talked about. ‘What, you think we were, screwy? We knew it’d get better. And we all stuck together’ – that’s the gist of it. If you’re rolling your eyes, be careful, or the baleful ghost of my wiseacre father may come in the night and tell you to get out there and cut the lawn, never mind needing to shovel snow off it first. He had it tough, so no bellyaching.

See, that generation could say what they wanted because what they lived has never been repeated – not yet. Remember, too – just when things looked rosier, here it came, not just a war: The War.

There were 120 million Americans in those days, and 400,000 died. We’ve tripled in population since then. My readers have math skills, as a rule. They can do the quick calculation and ask, what if?

Still, our hair has gotten quite mussed over the years, no denying. I’m 61, just aged enough to tell you, yes, these are hard times. Uncle Jim – Gentleman Jim, they called him, no lie – was kind as his nickname. But here’s what he said: “Keep in mind: during the worst of the Depression, 70 percent of people were still working.” No cynic or cold heart: just matter of fact, like they were. It could have been worse, see.

Well – silver lining… but that’s double the rate recorded in the worst of the coronavirus disruption (US unemployment in August: 14.7%). We’ve taken it on the chin for nearly one year – they were on the carpet for 12. The situation is hard today – recent unemployment rolls record 8.4% – but a recovery seems to be dawning.

The question for many business owners, our audience for today, is whether they can make it through even a few more months. If you’re scrambling to survive, you’ll need to cognate quick, move fast and seek clever alternatives. That’s how the old folks got through, and I’ve plenty of stories to share.

For now, I’ll spare you. Last week, I was working with a team of analysts on a report covering the UK’s pharmaceutical industry. I can’t share the details, which are a good bit drier than Uncle Lefty’s tales of the port of Shanghai in 1938, but we learn what we can, wherever we can.

The salient point is joint ventures – the bitterest rivals happily form them. An example: one firm has a high-tech manufacturing complex; another a unique precursor drug; still another has global-class researchers for testing; finally, the JV initiator holds a patent, a darn good idea, but so far it’s all on paper. Reinventing the wheel is no-go: who has the money? plus, it makes little sense. So they combine to create a new drug, take it through testing, get it in boxes and on the market. Everyone splits the profits according to schedule, as written in the JV agreement.

Lest you reach for torches and pitchforks, I hesitate to share information on the profit margins of new pharmaceuticals, but consider the expense, complexity and risk: it needs to be so, or it won’t happen at all. This explanation was in the executive summary, so no further questions, please.

The line between partnership and joint venture is clear in principle: the former are created for long-term cooperation, while JVs are project-oriented. You commonly see it with oil companies: cutthroat rivals down swords, deploy drills to exploit a confounding new deposit. Once it’s drained dry, or at least, when the easy money is made, JV partners tend to drop away, selling out to the most interested party. You can tell it works well: it’s popular.

JVs are created for the relatively short term, though in fact they can last decades. As common in business arrangements, clear distinctions go cloudy when the details are reviewed. JVs can be structured in infinite ways, and the creators must be careful: taxes are primary here, as authorities can be unpredictable – you say JV, they say partnership, perhaps. Who pays which taxes, and how, depends on the JV’s structuring, which clearly isn’t for novices.

In difficult times, though, a JV can keep several companies afloat, at least until stability dawns. Sharing costs, facilities and know-how, as shown by the pharma companies, has attractive, obvious benefits.

If you’re running a JV today, experts counsel: get hands-on in the business, today. Directors must spend more hours on governance – a JV needs close handling in volatile times. Opportunity is alive today, just as during the Depression (that happy 70% were doing something), so work your brains and your markets. It’s a good time to deploy the axiom, ‘prepare now for a better tomorrow.’

If your JV needs cash, consider new partners – companies with something to offer who need help of their own. This can be an excellent time to link up at reasonable terms – pardon me for saying, but the desperate aren’t demanding. It’s not a matter of taking advantage, but rather of expectations made reasonable by conditions. So take advantage of that, if no more.

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