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Read about Accenture's analysis stating that joint ventures in banking industry are emerging as an increasingly important lever of growth.
Joint ventures are emerging as an increasingly important lever of growth in the banking industry. As banks emerge from the recession, Accenture expects the number of joint ventures to grow as banks pursue high performance, particularly through expansion into emerging markets.
Based on an analysis of 158 banking joint ventures between 2004 and 2010, Accenture’ s Frédéric Brunier looks at the issues and identifies the key success factors.
As banks emerge from the recent recession and begin to consider growth, Accenture analysis shows that joint ventures are becoming an increasingly important instrument for banks to achieve high performance. These joint ventures often involve cross-border and cross-industry relationships.
Accenture believes that joint ventures will continue to grow as banks pursue further cost reductions and pursue growth, particularly in emerging markets.
Accenture’s analysis of 158 global joint ventures in the banking industry between 2004 and 2010 shows that they have grown by a factor of three. While the number of joint ventures did decline during the financial crisis, it did not drop below 2007 levels.
A comparison between joint ventures and acquisitions reveals possible reasons for this growth. For instance, joint ventures often provide faster time to market, fewer integration complexities, and less financial or reputational risk. They also promote knowledge exchange and innovation while allowing the joint venture partners to focus on their core businesses.
Accenture’s analysis also showed that companies are using joint ventures primarily to pursue growth, both in home and new markets. Banks also expect joint ventures to augment their capabilities and product lineups. Cost reduction is an expectation, but relatively low in importance.
Joint ventures have tremendous potential as engines of growth, portfolio enhancement and cost control. Yet it is equally clear that such relationships are difficult to implement effectively, and contain some amount of risk. As banks embark on joint ventures, they can boost their chances of success by considering several key factors.
Agree on joint purpose, goals and objectives. Rigorous, mutual due diligence is necessary to ensure that the assets contributed by each party will help the venture achieve its purpose.
Gain clarity on management and operational control. Perhaps the biggest challenge to creating successful joint ventures is managing shared ownership and, therefore, control over the venture.
Plan and manage programs effectively. The importance of effective planning and program management throughout the lifetime of the venture cannot be overestimated.
Create momentum quickly. Banks should strive to build momentum quickly to ensure rapid implementation and fast time to market. A strong management team is a key enabler.
Accenture helps some of the leading banks globally to achieve high performance through inorganic growth.
Frédéric Brunier is a senior executive in Accenture’s Corporate Strategy/Mergers, Acquisitions and Alliances service line based in Switzerland. During Brunier’s 15-year career, he has developed expertise in growth strategy, alliances and merger and acquisition, through his work in the banking, capital markets and insurance industries.
June 29, 2011
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