How does a Joint Venture differ from a merger?

A Joint Venture is characterized by the fact that ownership does not change as a result of the collaboration. In a Joint Venture, two or more companies come together to work on a specific project or business purpose while maintaining their distinct identities and ownership structures. Each partner in the Joint Venture contributes resources such as capital, expertise, or technology, typically working together for a limited period or to achieve a specific outcome, but they retain their individual ownership of their respective companies.

In contrast, a merger involves a complete transfer of ownership, where two companies integrate to form a single new entity. This means that the separate identities of the companies are dissolved, and a new ownership structure is created.

Additionally, a Joint Venture does not necessarily require a long-term arrangement, as it can be temporary and project-specific, differing from mergers, which tend to be more permanent in nature.

While large companies may enter into Joint Ventures with smaller entities, this is not a defining characteristic of Joint Ventures. The essence of a Joint Venture lies primarily in its shared operational goals and the retention of ownership by the participating companies.