PARTNERSHIP,

JOINT VENTURES
and CORPORATE
FINANCING
 DEFINITION
 PARTNERSHIP - Association of two or more
persons who co-own a business for a profit.
 Combines:

– Capital
– Talent
– Experience
Contract between partners should
specify
–Name, location, and nature of business
–Name, investment, and duties of each partner
–How new partners are admitted
–How profits and losses are divided up
–Withdrawals of assets by the partners
–How to settle up with a withdrawing partner
–How to liquidate the partnership
 Characteristics of a Partnership

•Limited life
•Mutual agency
•Unlimited liability
•Co-ownership of property
•No partnership income taxes
•Partners’ capital accounts
 Types of Partnerships

 General partnership
 Limited partnership
 Limited Liability Company

 Its own form of business organization

–Owners are called members
–Limited liability
–Members can participate in management
–Can elect not to pay business income tax
 WHAT IS A JOINT VENTURE?
 A joint venture (often abbreviated JV) is an
entity formed between two or more parties to
undertake economic activity together.
 The parties agree to create a new entity by
both contributing equity, and they then share
in the revenues, expenses, and control of the
enterprise.

 JV in Real Estate Sense
 In real estate, joint venture means that a project is developed by two parties jointly.
This generally happen where one party would have his land and the other party would
be interested to develop a project on that land.
This generally happen where one party would have his land and the other party would
be interested to develop a project on that land.
Some time the owner of the land could not develop it because of many reasons such
as he doesn't have the expertise or he doesn't have the fund and likewise for the other
party who want to develop might not have a land in the prime location where he can
build up a nice project.
So, if these two parties join together on a mutual understanding they sign an
agreement which is termed as Joint Venture Agreement. This agreement comprises
legal understand like will there be any advance or good-will money be paid by
developer to land owner? Advance is the amount which a developer needs to pay to
land owner which would be refunded by the land owner after completion of the
project. If any problem arises while constructing, because of which they couldn’t
complete the project, then that advance Amount will not be paid back.
 What a Joint Venture Involves:
A joint venture involves:
 1. A high level of commitment, funds, time
2. A degree of risk
3. A management voice for both parties
4. Equity participation by each partner
 REASONS FOR FORMING A
JOINT VENTURE
Internal reasons
 Build on company's strengths

 Spreading costs and risks

 Improving access to financial resources

 Economies of scale and advantages of size

 Access to new technologies and customers

 Access to innovative managerial practices

 ADVANTAGES OF JOINT
VENTURES
 Combining assets or resources.
 Efficient commercialization of a technology or
business concept
 Developing or acquiring market or
distribution expertise
 Sharing of scientists or professionals with
unique skills
 Financial support or sharing of economical
risk
 ADVANTAGES OF JOINT
VENTURES
 Acceleration of revenue growth
 Ability to increase profit margins
 Expansion to new domestic markets
 New product development
 DISADVANTAGES OF JOINT
VENTURES
 Potentially high capital cost plus ongoing financial
support are required.
 Profitable returns may take some time to achieve.
 High level of commitment of staff and management.
 Time consuming (especially where a new venture is
involved).
 Potential for conflict with your joint venture partner.
 Cultural differences and communications difficulties.
 Corporate Finance
 is the specific area of finance dealing with the financial
decisions corporations make, and the tools and analysis used
to make the decisions.

The discipline as a whole may be divided between:

 long term - capital investment decisions
 short term - working capital management.

 The two are related in that firm value is enhanced when return
on capital, a function of working capital management, exceeds
cost of capital, which results from the longer term, capital
decisions.
 The five basic Corporate Finance
functions
 1) raising capital to support company operations and investments (aka,
financing functions);

 2) selecting those projects based on risk and expected return that are the
best use of a company's resources (aka, capital budgeting functions);

 3) management of company cash flow and balancing the ratio of debt and
equity financing to maximize company value (aka, financial management
function);

 4) developing a company governance structure to encourage ethical

behavior and actions that serve the best interests of its stockholders (aka,
corporate governance function); and

 5) management of risk exposure to maintain optimum risk-return trade-off

that maximizes shareholder value (aka, risk management function).
 Corporate Financing covers:
 Raising seed, start-up, development or expansion capital
 Mergers, demergers, acquisitions or the sale of private
companies
 Mergers, demergers and takeovers of public companies,
including public-to-private deals
 Management buy-out, buy-in or similar of companies,
divisions or subsidiaries - typically backed by private equity
 Equity issues by companies, including the flotation of
companies on a recognized stock exchange in order to raise
capital for development and/or to restructure ownership
 Corporate Financing covers:
 Raising capital via the issue of other forms of equity,
debt and related securities for the refinancing and
restructuring of businesses
 Financing joint ventures, project finance,
infrastructure finance, public-private partnerships and
privatizations
 Secondary equity issues, whether by means of private
placing or further issues on a stock market
 Raising debt and restructuring debt.