What are the 5 most successful joint ventures in America? With the advancement of technology, which facilitates communication, interconnection and globalization, allowing for enterprises from different corners of the world to collaborate easier and more efficiently, joint ventures have become something rather common. However, since joint ventures represent a collaboration between two companies, which often have different visions and approaches, there are many pitfalls, which are often overlooked and may result in the break-up of the joint enterprise.
A joint venture is a business entity that is created by at least two parties, which share ownership, returns and risks. A joint venture can be a business, or it can work on a single project that all parties have interest in. In the last couple of years, several joint ventures entered the spotlight in the automotive industry. With technology making self-driving cars possible, Fiat Chrysler Automobiles NV (NYSE:FCAU) has recently partnered with Alphabet Inc (NASDAQ:GOOGL)’s Google division to develop self-driving cars. Google has been working on self-driving technology for a while and its partnership with Fiat should allow it to integrate its technology and bring it to the masses sooner. A joint venture with a similar objective was recently launched by Swedish carmaker Volvo and Uber, which agreed to pool together an investment of $300 million to bring the autonomous driving capabilities to China’s Geely-owned Volvo’s XC90 flagship SUV.
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However, both Google/Fiat and Volvo/Uber’s partnerships are at early stages and its unclear whether or not they’ll succeed. As stated earlier, joint ventures are not immune to challenges and sometimes can even be more prone to conflicts than other deals, like mergers, which usually come with the adoption of a single company’s business culture. In contrast, joint ventures involve several parties coming together. These parties may have different strategic interests and decision-making processes. Joint ventures also often mean that employees of the parent companies have to work side by side, so there might be conflicts on the grounds of cultural differences. This is why parties involved in forming a joint venture have to establish the details of the new entity’s operations from the start, clearing any hurdles and allowing for compromise on all aspects of day-to-day operations. The parent companies should also settle on the degree of each party’s involvement in the oversight and financing of the joint venture and the returns that each party gets based on this involvement.
Because many companies fail to set the ground rules before launching their joint ventures, many partnerships fail. In 2001, Harvard Business Review conducted an analysis of over 2,000 joint venture announcements and found out that only 53% of them resulted in a positive return on investment for all involved parties. HBR did a similar analysis of 49 joint ventures in 1991 and found that only 51% succeeded. So the success rate for joint ventures has remained pretty low, even though companies had more information about them in 2001 than a decade earlier, and should have been more aware of potential reasons for failures.
Nevertheless, amid the many joint ventures that were failures right from the start, or were shut down for other reasons, a number of them stand out and are still operational. With this in mind, let’s take a look at the 5 most successful joint ventures in America, beginning on the next page.
Verizon Wireless is currently the largest telecom company, with over 145 million subscribers. It is currently a wholly-owned subsidiary of Verizon Communications Inc. (NYSE:VZ), but it was started in 2000 as a joint venture between Bell Atlantic (which later changed its name to Verizon Communications Inc. (NYSE:VZ)) and British multinational telecom company Vodafone. The companies created Verizon Wireless, with Verizon Communications Inc. (NYSE:VZ) maintaining a 55% stake and operation of the business and Vodafone retaining 45%. The deal was worth $70 billion and resulted in Verizon Wireless merging with some of Vodafone’s US assets, which allowed it to offer national coverage at competitive rates. In 2013, Verizon Communications Inc (NYSE:VZ) acquired Vodafone’s 45% stake in Verizon Wireless for $130 billion.
Owens Corning (NYSE:OC)
Owens Corning (NYSE:OC), a leading provider of insulation, roofing and fiberglass composites, was formed as a joint venture decades ago and not only it is still in operation, but it has also been included in the Fortune 500 list since its establishment in 1955. In 1935, Corning Glass approached Owens-Illinois with the proposal to join forces in the production of glass fiber. The companies partnered and shared the costs related to the development of glass fiber. In 1938, Owens-Illinois and Corning Glass decided to spin-off the joint venture as a separate company. Owens Corning (NYSE:OC) had sales of $5.7 billion in 2016, versus $2.56 million reported back in 1938.
MillerCoors is next on the list of the five most successful joint ventures in America, being the second-largest brewer in the US, trailing only Anheuser Busch Inbev NV (ADR) (NYSE:BUD) with sales of $7.70 billion in 2015. The company was founded in 2008 as a joint venture between UK-based SABMiller and Molson Coors Brewing Co (NYSE:TAP), to be responsible for their US operations and market the products of both companies. In 2015, Anheuser Busch Inbev NV (ADR) (NYSE:BUD) acquired SABMiller, with the latter selling its stake in MillerCoors to Molson Coors Brewing Co (NYSE:TAP) for $12 billion. Following the deal, MillerCoors became the US business unit of Molson Coors.
An American provider of on-demand video, Hulu is a joint venture that was launched in 2008 and is currently owned by Walt Disney Co (NYSE:DIS), Twenty-First Century Fox Inc (NASDAQ:FOX), and Comcast Corporation (NASDAQ:CMCSA), which hold 30% each, and Time Warner Inc (NYSE:TWX), which owns a 10% stake. Hulu provides content from channels owned by its parent companies and is engaged in producing original content. Access to a lot of content is what allows Hulu to compete with other on-demand providers, such as Netflix, Inc. (NASDAQ:NFLX), although the latter has a wider reach due to its international expansion.
In 2011, Microsoft Corporation (NASDAQ:MSFT) and General Electric Company (NYSE:GE) formed a 50-50 joint venture that would ensure a partnership between each company’s healthcare units. The venture, called Caradigm, was tasked with creating a “Windows-like platform” for the healthcare industry that would make use of Microsoft’s Amalga software for storing patients’ electronic health records and General Electric’s Qualibria. Other products and services included in Caradigm were Microsoft’s Vergence and expreSSO, and GE’s eHealth. Not much was known about the deal, aside from the fact that Caradigm had around 750 employees and that Microsoft moved most of its people and technology from its former Health Services Group. However, in 2016, it was discovered that Microsoft had quietly sold its share of Caradigm to General Electric Company (NYSE:GE). Caradigm is still operational as part of General Electric and closely collaborates with Microsoft Corporation (NASDAQ:MSFT).
These are the five most successful joint ventures in America. The companies are among the leaders in their respective industries, even though some have been spun-off as independent companies, while others ceased to be joint ventures and became wholly-owned subsidiaries of one of the parties involved. In any case, their success resulted in great returns for each of their parent companies.