What is a Joint Venture?
In stark contrast to a merger, a joint venture is merely the coming together of two business entities to undertake a single project or aspect of business. This does not involve dissolving their original business or changing the organizational structure to the extent that this occurs under a merger.
In a joint venture, a new company may be formed as the vehicle to effect the change or the combined effort. Each company will then take an interest, both operational and financial, in the new company and their share in the profits or losses of the new venture, which will be directly linked to the level of involvement or commitment they put forth from the start.
Although joint ventures are not as complete, and in some cases not as permanent as mergers, (because the newly formed company may be dissolved when the project has ended) this is not to say that they can be taken lightly. Embarking on a joint venture with another company can cast a positive or a negative light on the participating businesses depending on how the project is perceived. So they must be carefully planned out so they do not have a poor effect on the rest of the company's business.
The difference between a merger and a joint venture is, therefore, clear cut. Although they both involve bringing two entities together, this is often where the similarity ends.
Image: Francesco Marino / FreeDigitalPhotos.net