IandP_MoF52_Joint-ventures_1536x1536_Original

Joint ventures on the rise

By Eileen Kelly Rinaudo and Robert Uhlaner

New survey results find executives are largely positive about their past experience with joint ventures and expect such partnerships to grow.

Joint ventures and M&A are both poised to grow in the coming years, as interest in corporate partnerships grows. In fact, 68 percent of respondents to McKinsey’s newest survey on the subject1 expect their companies’ joint-venture activity to increase over the next five years, and 59 percent expect an increase in M&A.

Not surprisingly, the more experience companies have with joint ventures, the more likely they are to use them. Nearly 90 percent of respondents at companies with more than six 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. Moreover, executives hold a largely positive view of how past joint ventures have performed. 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 (Exhibit 1).

Those are promising indicators for companies currently managing joint ventures or contemplating new ones, though there’s plenty of room for improvement. Most executives say, for example, that their companies lack consistent management practices from one venture to the next. In fact, even companies with the most active joint ventures tend to manage their partnerships individually (Exhibit 2). And few respondents report the use of standardized resources, such as playbooks, that enable consistency and the sharing of best practices. They also report little consensus on the way to measure joint-venture performance and are divided over what success means. For example, meeting revenue targets is widely acknowledged as an important measure of success, but keeping to the expected timeline for key milestones is not.

About the author(s)

Eileen Kelly Rinaudo is a senior expert in McKinsey’s New York office, and Robert Uhlaner is a director in the San Francisco office.

More on Strategy & Corporate Finance
Article

The next-generation operating model for the digital world

Article - McKinsey Quarterly

What makes a CEO ‘exceptional’?

Article - McKinsey Quarterly

Three game changers for energy

Article - McKinsey Quarterly

How functional leaders become CEOs