ILMA Compoundings March 2018 - 22

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would be a group of companies agreeing, by contract, to
certain mutually beneficial obligations or behaviors in pursuit of a common goal." Consortiums do not create a new
entity in the way that a joint venture might, depending on
the arrangement, so a consortium can be thought of as a less
strict and structured arrangement than a joint venture.
"A joint venture is typically more concretely associated
with a specific pursuit of revenue, whereas a consortium could
feasibly be used to pursue 'softer' goals," Patterson continued.
"Both, of course, stop well short of a merger or acquisition,
[which] would be a full joining of all business activities and
the merging companies' finances and ownership."

What are the opportunities
and benefits?
The prominent benefit to glean from a joint venture
comes from two businesses being able to join together in
pursuit of a goal while still retaining their normal business
activities outside of the joint venture. Leiter explains that
"when you look at it from the ILMA member's perspective,
a contractual joint venture has the least impact on the
member's existing operation. Effectively, contractual joint
ventures are extensions of what ILMA-member companies
are already doing."
"At the end of the day, within contractual joint ventures, the
parties involved typically retain all ownership and control of
their assets," he continued. "To the extent that they collaborate
and create a new product or service, they can contractually

MARCH 2018

| COMPOUNDINGS | ILMA.ORG

agree on allocation and ownership without any specific need to
account for their relative contribution of capital or assets."
Another benefit of participating in a joint venture is that
it simply makes good business sense.
"A joint venture makes the most sense," explained Patterson, "when it would be too costly to undertake the project
on one's own. For example, if a desired new market is
halfway around the world or if a new product would require
tremendous amounts of capital expenditure."
Even smaller companies can find success participating in
a joint venture. "I'm not sure that size matters," Leiter mentioned. "The important thing is - particularly if you have
someone who has a relatively small industry footprint, and
they're thinking of joining with someone large to help them
in a joint venture capacity - you're going to want a noncompete, an exclusivity agreement so that there's some leveling
of the playing field. I know some ILMA members that have
specialty products and they're small, and by partnering with
some of the larger ILMA members, they have not only been
able to hold their own within the industry, but they have
been able to reach greater heights much quicker."

"A joint venture makes the most
sense when it would be too costly to
undertake the project on one's own."
- Mandy Patterson

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ILMA Compoundings March 2018

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