Setting Up a Joint Venture

Currently, World’s economy is growing very fast. But for the first time, stepping in any country the most preferable form is the Joint Venture for setting up a business entity. Also, in case the business and legal environment is not known, it is advised to form a Joint Venture. A Joint Venture is joint agreements among two or more parties come together and form business or contractual relationship for executing specific business model. There are two types of Joint Ventures: Contractual Joint Venture and Equity Based Joint Venture.

Contractual Joint Venture

Wherein two or more individual or companies comes together and forms an agreement/contract for working jointly but no individual entity is build for executing the business contract. The main features of contractual joint ventures are described below:

·         Two or more organizations comes together into an agreement with a similar intention of project execution

·         Each organization or individual brings its own roles, shares and responsibilities are accordingly decided to depending upon each one’s field of expertise

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Equity Based Joint Venture

In this an individual legal entity is formed which is owned by two or more individuals who are working jointly with a similar intention.  And also decides to equally participate in the equity of entity that is newly formed. This newly incorporated entity may be in the form of LLP, Partnership firm, Company etc. In general, in this type of joint venture, the benefits as well as losses of entity that is owned together are distributed among the all the individuals or parties based on the capital ratio contributions made by them. The key features of equity-based joint ventures are as follows:

·         Shared rights by the individuals/companies involved

·         Shared management of together owned entity

·         Shared benefits and losses based on the agreement

Benefits of a Joint Venture

Two or more individual’s ownership in an organization and each and every person contribute different aspects having long-term profits in their mind. Fundamentally, everyone has found it essential to have a business partner. Likewise, in the US, business partnerships must be done legally along with proper government documentation. This process includes registration and building of a partnership agreement, describing business objectives, responsibilities, and legal liabilities of an individual. Often, business associates always want to be exposed themselves with the liabilities and risks associated with an unlimited general partnership. A limited partnership agreement might mitigate such kind of issues. Also, in limited partner’s case, both individual don’t have same no. of control over a business practices, and also don't have same level of debt exposure of the business. The specific rights along with business responsibilities of these partners should be laid out in the agreement of partnership. However, the business formation laws having limited partnerships, varies state to state.

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Joint Venture- A Good Fit for Successful Business

Joint ventures combine two or more separate business entities for undergoing on a business idea or specific project with mutual decision for successful functioning of both the businesses. In this way, both the entities only give their daily business operations rather giving whole control over their business. Both the business entities continue to function independent of each other, except the specific idea or project they have decided to run together. Every member does capital investments and put their resources, and takes the risk involved in that process. On the whole, a partnership which is in general form couples two or more persons in a permanent business relationship. In this venture, there is no operation or functioning separation neither there is any kind of limitations on the any activities or projects taken together to work for.

About ALCOR Mergers and Acquisitions

Alcor M&A is a leading advisory firm providing financial services with an emphasis on customized solutions in the areas of M&A advisory, Joint Venture Advisory, Financial Advisory,  Private Equity, Debt Financing  and International Business Development. These services leverages insights, relationships and a culture that emphasizes a strong orientation towards excellence.

For additional information on how ALCOR MNA can help you Grow your Company, Complete the Enquiry form One of our representatives will contact you within one business day.  

                                                                     
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Private Equity Financing

In the world of business, private equity financing is termed as way of raising capital by selling business shares to investors. The capital which is raised through private equity financing is not paid back in installments along with interest, unlike debt financing. In its place, investors become partial owner of that particular business by putting money in it. Then they are entitled to share profit of a business over time. Within three to five years, most investors wait for a return on their investment.

Friends and family is the common source of private equity for business owners. Unlike personal loan, once business starts making profit, investments done by family and friends are paid back, although it might take several years. Often, it has been observed that with the operating cash flow of business, business owners fix payments to investors. One can say that when the business grow and makes profits, investors also make money. And once they get specific set of return on their investments, they usually get rid of that business in which they are involved. Usually, family and friends investments are made at the initial stage of business but as it grow and proves its worth, the business start getting financing from angel investors . While venture capitalists and angel investors are lumped jointly as one funding source, actually they provide two different functions.

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The Private Equity Advantage

As it is said that private equity financing is not for all but it provides greeting option for debt financing to several business owners. In fact, private equity financing against debt financing cannot be charged with two major gripes business owners’ level due to risk with personally guaranteeing a loan and the constraint placed by it on available cash flow. Private equity eradicates the drawbacks of debt in that and for paying down debt, it does not divert capital from the business rather it shares risk in the business along with the entrepreneur.

Another advantage of private equity is that you don’t need to pay right back to investors after they provide funding to your business. It means that one has more time for growing his business before he starts worrying about how he will how he will pay for it or not.  And in case business fails totally, one doesn’t have to repay. It is fact that investors either swim or sink or alongside the business owners.

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Moreover, private equity is actually an umbrella term for huge money raised directly from recognized institutions & individuals and pooled in a fund that mostly invests in certain range of business ventures. For considerable long-term gains, attraction is the potential. Generally the fund is placed as a limited partnership, with the investors as limited partners and a private equity firm as the general partner. Typically, private equity firms charge huge amount of money fees for taking part in partnership and be inclined to focus in a particular investment type.

Private Equity at Alcor MNA

With in-depth knowledge of the entire Private Equity investment process including– identification, initiation, structuring, valuation and execution– our team has the ability to execute transactions quickly and efficiently. AlcorMNA advise both listed and unlisted companies in raising growth capital. We perform in-depth due diligence on each fund that we consider, marshaling resources from across our investment team to identify, vet and select investments that can help clients achieve their portfolio goals.

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Alcor has strong relationships with key global Private Equity players & venture funds and understands investment themes and priorities of various financial sponsors. This helps us connect growth companies with PE firms in a focused and timely manner.Our deal structuring expertise and capability to execute private equity transactions through every stage of the deal process is a key strength.

About ALCOR Mergers and Acquisitions

Alcor M&A is a leading advisory firm providing financial services with an emphasis on customized solutions in the areas of M&A advisory, Private Equity, Debt Financing and International Business Development. These services leverages insights, relationships and a culture that emphasizes a strong orientation towards excellence.

For additional information on how ALCOR MNA can help you Grow your Company, Complete the Enquiry form One of our representatives will contact you within one business day.

http://www.alcormna.com