Joint ventures are becoming more common as companies seek growth opportunities, but PwC finds they often fail to achieve objectives. While 43% of Australian companies planned joint ventures in 2014, up from 28% in 2013, PwC data shows half fail to meet goals and two-thirds dissolve within two years. Common reasons for failure include cultural clashes between partners and an initial focus on legal agreements rather than strategy. Successful joint ventures require flexibility, regular progress reviews, and a willingness to evolve the partnership over time based on learnings. However, the odds of success remain low, as strategic partnerships in industries like banking have also commonly struggled.

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Odds against joint ventures
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A PwC survey says 43 per cent of local bosses planned to enter a joint venture or alliance in 2014, up from
28 per cent a year earlier. Photo: Nic Walker
Joint ventures are becoming ​increasingly common in Australia as
companies seek to expand earnings, but accounting firm PwC
cautions half of these alliances typically fail to deliver on
objectives and two-thirds no longer exist within two years of
formation.
PwC partner Mike Sum told The ​Australian Financial Review
companies were starting to treat strategic alliances as an “equally viable" alternative
to ​traditional mergers and acquisitions.
“The overall desire is for growth," he said, referring to companies expanding offshore
or into new product markets.
But the track record for alliances is poor as cultural differences, poor decision making
and conflicts often set in.
“How they fail tends to arise in the implementation process. Companies tend to start
with a partner and not a strategy," Mr Sum said.
A global PwC survey which drew on responses from almost 50 Australian chief
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executives found 43 per cent of local bosses planned to enter a joint venture or
alliance in 2014, up markedly from 28 per cent a year earlier.
Recent joint ventures and ​partnerships include Woolworths’ financial services tie-up
with Visa, rival supermarket group Coles’s alliance with GE Capital, Telstra’s joint
venture with security services company SNP Security, and Aurizon’s partnership with
Chinese steel maker Baosteel in a bid to acquire Aquila Resources.
Mr Sum said the Australian joint venture market was “significantly less mature" than
in the United States, where more than 40 per cent of ​business is conducted through ​‐
alliances and partnerships.
He estimated in Australia joint ​ventures generated 10 per cent of ​business activity, but
expected the increasing trend could see the domestic market swell to $100 billion in
the next two to three years.
PwC also identified “too much focus" on legal aspects of an alliance as a pitfall of joint
ventures that failed.
“While this is important, rather than driving success it tends to deal only with when
things go wrong," Mr Sum said.
“Making sure everyone is working toward a common goal and building trust is more
important. Sometimes partners are too concerned with ​protecting their own
interests, fighting for the largest share of the pie."
Mr Sum identified online jobs advertiser Seek as a successful local company that has
sought out alliances in Asia as part of a regional growth strategy.
“The key is to stay flexible, measure progress, learn as you go, and evolve the
partnership over time," he said.
But the odds are not great. In the past, strategic marriages in the banking ​sector have
not always fared well either.
Eight years ago, Woolworths ​outlined plans to introduce a national network of its
own-branded automatic teller machines in supermarkets and bottleshops after
striking a landmark deal with ANZ Banking Group and unwinding its troubled Ezy
Banking venture with Commonwealth Bank of Australia.
BBY’s analyst Brett Le Mesurier said with joint ventures in the banking industry it was
often difficult to gauge the lines of responsibility and control, as the functions were
shared.
Differing objectives with alliances in the retail sector could also hinder ​co-operation.
“Retailers want to make more from their customers, while banks want to acquire
more ​customers," he said.
“Often with banking joint ventures they start with a lot of fanfare and end up
nowhere."
Virgin Money has also had a ​turbulent experience in Australia, including troubled
partnerships with banks including Westpac.
Virgin Money was acquired by Bank of Queensland last year.
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