OINT VENTURES have become an essential business strategy allowing businesses to expand into foreign markets, develop new products and tap into synergistic relationships with less risk and a higher probability of success. By taking advantage of the strengths of their joint venture partners, businesses are able to gain valuable business or technical expertise that would be costly to acquire or develop on their own. However, the gains of working with a partner come at a price: loss of control, the possibility of changes in the partners’ vision or commitment over time and the difficulties of melding different business styles and philosophies.
To limit the risks of working with partners, joint venture participants need to protect themselves by carefully defining when they may exit the relationship and what, if anything, they may be entitled to upon exiting the relationship. For the same reason that prenuptial agreements are troubling legal agreements to negotiate for those soon to express their love for each other “for better or worse,” joint venture partners are often reluctant to define the limits of their commitment to each other. More practical reasons for avoiding the topic of exit provisions include the difficulty of predicting the future and the time and expense of negotiating out detailed provisions that are likely to expose flaws in the new relationship and will hopefully never come into play.
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