Collaboration agreements: Union and partnership between companies

The following collaboration agreements between companies are similar contracts to the collaboration agreements between companies and professionals we saw in the guide of “contracts of commercial collaboration”. If you are thinking about expanding your business you may find this guide interesting.  

Joint venture

This is one of the collaboration agreements between companies we talked about. The collaboration is carried out between two companies (or more), which are associated with a common business for a certain period of time to collaborate with their resources.

The forms of collaboration can be varied: 

• From the simple agreement to work together to develop a business. 
• Until the establishment of a society with flexibility of constitution that allows it to operate in external markets. It is useful for international business.

The companies that are associated contribute with their resources to carry out a commercial activity through which they can obtain a mutual benefit. These resources can be raw materials, capital, technology, market knowledge, sales and distribution channels, personnel, financing or products.

Collaboration can be carried out through contracts in:

1. Collaboration agreements or business cooperation, bilateral or plurilateral with several companies. 
2. Associative pacts (non-corporate). Parties are associated, but not absorbed. 
3. Organization agreements. In order to achieve the proposed objective an organization must exist.

Characteristics of the Joint venture agreement

• Time-limited duration. 
• Search for a common utility on the part of the participants (synergy and economic interest). 
• Joint management of the company by the partners.
• Control by parent companies or individuals who have created it. 
• Restructuring of the company: a new independent society is formed with legal personality. 
• Increase in customer portfolio. 
• New products and services.

Preparation

In the preparation phase, companies who are going to collaborate require a risk analysis of the service provider company main activity to which it is going to be tied. It is not advisable to reach the phase of the agreement without first knowing in depth the services and resources of the other party. A bad service could decrease the quality of our product, which directly affects our future benefits.

Negotiating the agreement  

Agreements between companies must define the basic elements of the relationship:

• Purpose and scope of collaboration: objective, area of action and duration of the agreement. 
• Valuation of the contributions that each party has agreed: personnel, products, and consequent distribution of benefits.
• Strategy approach: Implementation of synergy in success, which could result in the decision to take new risks or even an organic change in the joint venture.
• Regulatory principles of decision-making.
• Rules and responsibilities in the departure of the Joint venture: including acquisitions by one of the parties or by a third party

Avoid future conflicts by consulting your legal advisor to prepare a partnership agreement.

Strategic alliance

Another form of collaboration agreements between companies is the strategic Alliance Pact. This pact is commonly used in international collaborations between companies that have a greater permanence in time than a temporary union. It is a hard negotiation process, where the companies agree to share their resources to achieve a mutual benefit goal. Unlike the previous model implies:

Benefits

• It reduces the financial and strategic risk with third parties. 
• increases profits and productive capital. 
• Costs are also minor, thus taking advantages without the need to restructure the companies involved.

Disadvantages

• There’s less control over operations.
• The potential growth of the allied companies is shared.
• Implies a lower level of commitment of each partner.

Preparation

To ensure a strategic alliance, it is important first to look at the details you will be discussing:

1. Define what type of partner you are looking for (ideal characteristics of a partner).
2. Clearly identify what strengths you could offer to the other party and why the potential partner would like to build a relationship with you.
3. Draw up a list of potential candidates for alliances.
4. If possible, please contact the candidates: for example, through your representative or a direct letter explaining your interest and opportunities to create a business relationship.
5. Hold a previous meeting to know the interest of the other party.
6. Make a letter of intent, so you can explain what the work methodology and the destiny of the capital will be. 
7. As it is a complicated matter, go to your expert lawyer to prepare a formal agreement so you both can sign.

[See other models of commercial collaboration contract]