The concept of due diligence.

"Due diligence" is a term used for a number of concepts involving either an investigation of a business or person prior to signing a contract, or an act with a certain standard of care. It can be a legal obligation, but the term will more commonly apply to voluntary investigations. Know the people and companies you are dealing with.

When is needed: mergers and acquisitions, taking new people on board, dealing with new customers and suppliers.

The relevant areas of concern may include the financial, legal, labor, tax, IT, environment and market/commercial situation of the company. Other areas include intellectual property, real and personal property, insurance and liability coverage, debt instrument review, employee benefits and labor matters, immigration, and international transactions.

56. The concept of joint ventures.

A joint venture is a business agreement in which parties agree to develop, for a finite time, a new entity and new assets by contributing equity. They both exercise control over the enterprise and consequently share revenues, expenses and assets. There are other types of companies such as JV limited by guarantee, joint ventures limited by guarantee with partners holding shares.

In Germany, 'joint venture' is better represented as a 'combination of companies' (Konzern)

The venture can be for one specific project only - when the JV is referred more correctly as a consortium (as the building of the Channel Tunnel) - or a continuing business relationship.

Reasons for one partner: adding up to the brand awareness, higher profile, economies of scale or scope, globalization, cutting back the competition, R&D at a shared cost, marketing sales channels of a different company, work on expanding the word about the products (collaboration of Coke and Pepsi).

Downsides: Possible antitrust law violations, companies stops competing, boards may enter in conspiracies, different cultures, philosophies and expectations, inadequate reaction and misunderstandings, lack of synergies between companies.

Date: 2015-02-03; view: 726