Joint venture partner due diligence in Europe and Africa: the questions that prevent a bad marriage

A joint venture or distribution partner is the most consequential decision in most overseas expansions. You are tying your brand, your capital and often your personal liability to someone you met three times. The due diligence is not about distrust; it is about knowing what you are marrying.

Europe: excellent records, subtle risks

European company registries are generally complete and accessible, and beneficial ownership registers exist across the EU and UK, with varying public access. The risks are subtler: a partner in financial distress hidden by group structures, litigation in another member state, regulatory sanctions from a sector authority, or a controlling shareholder whose other interests conflict with yours. Filed accounts, insolvency registers, court databases and regulator enforcement lists across every relevant country are where the answers are, and they are best read by someone who knows what a normal company in that market looks like.

Africa: reality on the ground

South Africa, Kenya, Nigeria, Ghana, Egypt, Morocco and Mauritius each have functioning registries and courts, but access, completeness and reliability vary, and much of what matters is not written down anywhere. Political exposure is common and sometimes unavoidable in the sectors where foreign partners are sought. The essential work is on the ground: confirming the partner's operations, speaking to people they have dealt with, and understanding the local regulatory and political environment the partner claims to navigate.

The questions

• Who owns and controls the partner, all the way to living people?
• Can they fund their share of the venture, from where, and is that evidenced?
• What have their previous partnerships and distributorships looked like, and how did they end?
• Are they, or their principals, politically exposed, and what does that mean in this market?
• Any litigation, insolvency, regulatory action, sanctions or adverse media, including in local languages?
• Do they hold the licences, distribution rights and premises they say they do?
• Who are their advisers, and do those advisers also advise you?

Anti bribery is your problem too

Australian and UK companies are liable for bribes paid by partners and agents on their behalf, under the Criminal Code foreign bribery offences and the UK Bribery Act. Adequate procedures include due diligence on the partner, contractual anti corruption terms, and monitoring. A partner whose business model depends on "relationships" with officials is a liability, not an asset.

Structure follows findings

Due diligence findings should change the deal: board composition, reserved matters, audit rights, step in and exit provisions, escrow of contributions, and dispute resolution in a forum that will enforce. Local legal advice from a lawyer acting only for you turns findings into protection.

Keep looking after signing

Ownership changes, new litigation and political shifts happen. Periodic re-verification of the partner, and a way to raise concerns discreetly with someone independent in the market, keeps the venture on a footing you understand.

Valitros conducts joint venture and distributor due diligence across Europe, the Middle East and Africa, with on the ground verification through vetted licensed partners. See the service or book a call.