In a previous post titled How to bring a foreign company to Spain, Dos Aguas Team discussed the three most common ways to start a company in Spain: a Representative Office, Subsidiary or a Branch Company. Being these three the famous and regular ones, in this blog, we would also like to introduce another formula that can be as effective and beneficial as the other three: the Joint Venture.
In Spain, the most common case for a Joint Venture to take place is when a foreign company wants to enter the Spanish market. The reason for this is that the growing demand for services and products in the international market generates a greater need for collaboration and corporate restructuring in order to carry out a specific commercial operation. These commercial operations mean investments and responsibilities that are easier to take over if the risks are distributed into two different companies.
The Joint Venture is therefore structured as a temporary strategic partnership, a business collaboration that maintains its individuality and legal independence. However, it acts under the same direction and standards. The most common example of a Joint Venture is when a foreign company associates with another company that is already established in Spain and therefore, knows the market. In this case, both companies can combine resources and knowledge, at the same time that they spread risks. The local partner contributes to the personnel, the knowledge of the economic and social context of Spain, and the expertise of the access to the Spanish market. In this scenario, Dos Aguas helps the foreign company to find the right local partner, as well as it elaborates the contract of the Joint Venture. This contract includes the following aspects: the initial contribution of each of the companies, their goals, the logistics of the operations, the consequences that both the benefits and the losses will have for each of the companies. The importance of this contract being supervised by Dos Aguas Consulting lies in the fact that this will prevent from having legal problems during the entire time that the companies are united.
Next, we are going to break down the advantages and disadvantages of creating a Joint Venture in Spain.
The main advantage of the Joint Venture is that both companies share the risks and costs of operations and marketing. This allows them to be more competent, cover more different markets and increase their economic power. In addition, the joint venture allows them to share the know-how and thus manage more information.
The main disadvantages of a Joint Venture are the possible conflicts of interest between the two contracting parties, as well as the dependence of the other partner to make the important decisions. This is coupled with the necessary adaptation to a different culture as it is the Spanish, as well as its market which might be unknown to the company outside of Spain. Therefore, there is a possibility that the integration and communication are poor between both partners. However, these disadvantages can be easily solved with the participation of Dos Aguas, that act as a mediator and is in charge of taking corrective measures and correct strategic decisions, so that the relationship is excellent for the interests of both companies.