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The Joint Venture was renegotiated limiting the Partner’s operational involvement, but not their investment, putting our client in control of the Canadian business. The Canadian launch was undertaken; only suffering a 3-month delay to the original schedule followed a short time later by launch in the United States.
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Renegotiating a Joint Venture
Our client entered into a 50/50 joint venture with a Canadian company to distribute its technology in that country, in order to establish “proof of concept” to underpin a roll out in the United States. The joint venture partner was chosen because they had a very close and long-standing business relationship with a major Canadian corporation, who was the primary end user target for the technology in Canada.
The agreement called for our client to provide its technology, updates, ongoing support and further development of the underlying technology. The local partner was to run the Canadian business, providing all necessary infrastructure and finance to launch the business and support its operations for the first 2 years.
Our Challenge
Not long after the joint venture had been legally concluded the Canadian Partner began to agitate for greater control over the technology and the business. They also delayed work on the IT integration program that was scheduled to run for 6 months. It also became evident the Partner was incapable of executing the business.
This was potentially disastrous for our client, not only putting the Canadian launch and an investment of several million Pounds at risk, but also the possibility of “missing the boat” in the US if the Canadian launch was delayed.
Our challenge was to re-structure the contractual relationship with the Canadian Partner by reducing their control and operational involvement, at the same time ensuring minimal further delay.
What we did
A detailed analysis and argument was put together providing strong grounds for our client to terminate the Agreement for breach. However, the Canadian Partner had a reputation for being litigious and a successful litigant at that. Litigation would have resulted in at least a 2-year delay, which was considered commercially unacceptable – so was any capitulation to the demands of the Partner.
The answer: to recruit the End User target to the notion that it would be in their interest for the Canadian business be managed by our client, rather than the Canadian Partner despite their close working relationship. This required very delicate and sensitive negotiations over a 4 month period – Ultimately, successful.
The Outcome
The Joint Venture was renegotiated limiting the Partner’s operational involvement, but not their investment, putting our client in control of the Canadian business. The Canadian launch was undertaken; only suffering a 3-month delay to the original schedule followed a short time later by launch in the United States.
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