Joint Ventures as a Route to

Growth

Conference on Family Business

ISB – Hyderabad
(February 7th, 2009)
Farhad Forbes
 Outline
– Brief Background of Forbes Marshall
• Growth model

– Why did we choose Joint Ventures as an integral part of

our Growth model?

– What works?

– What doesn’t?

– Why JVs can be well suited for Family Business?

– Some challenges

Family Business - ISB, Hyderabad

 Forbes Marshall - Background
• Started in 1926 as a trading company by
J.N.Marshall and later expanded into a
manufacturing and engineering oriented
Corporate Group by Darius Forbes

• Expertise in two broad areas:

– Energy Conservation, Steam Engineering, Plant Utilities
management
– Process Automation and Control

• About 1000 people in 25 Cities in India and in

9 Countries, most of whom are Engineers

Family Business - ISB, Hyderabad

 Forbes Marshall - Background
• Darius Forbes led the Company until the late 1980s, assisted
by our mother, Maharookh. My brother, Naushad, and I joined
the business in the 1980s.
– Farhad - 1982
– Naushad - 1985

• Darius Forbes is still Chairman of Forbes Marshall but

withdrew from day to day management when Naushad and I
became responsible.

• Today my brother, Naushad, my wife, Rati, (who manages HR

and Community Development activities of the Company) and I
are the three family members actively involved in the day to
day management of the business.

• We are assisted by a Management Team of committed and

competent non family professionals, responsible for different
functions of the business.

Family Business - ISB, Hyderabad

 Growth Model
• Privately held
• Growth internally financed and organic – in
our chosen fields of Steam Engineering /
Process Control
• A Group of 7 companies, 5 of which are JV
companies
– JVs with companies that are world leaders in their area of
expertise
– All JVs are 50:50 JVs
• JVs today:
– Spirax Marshall (1958)
– Krohne Marshall (1984)
– Forbes Marshall Arca (1986)
– Forbes Marshall CODEL (2007)
Family Business - ISB, Hyderabad
 Strategy
• Pursue the FM Vision, but simultaneously
continue to grow and establish the JVs we
have into the leading players for the
objectives they were set up
• Have long term commitments to our JV
partners, and we feel we have built the
relationships with trust, transparency and
commitment to achieving the objectives of
both JV partners in each case.
• Has resulted in our JVs surviving – contrary to
popular management philosophy that most JVs
do not work beyond a certain limited period.

Family Business - ISB, Hyderabad

 Why JVs?
• Earlier, objectives were:
– Technology for Forbes Marshall
• A complement to our own R&D efforts, and the route to widen the
product range / offering to our customers
• JVs vs other forms of cooperation – why we chose the JV route.
– Market presence in India for the JV partner
• Spirax in India / KROHNE in India etc
• Today:
– Sourcing of products from the Indian JV for global
markets
– Joint R&D
– From our perspective the JVs are a means to secure
technology
– Provide global market access for Forbes Marshall
Family Business - ISB, Hyderabad
 Why JVs?
• We chose Joint Ventures as the means to cooperate
with overseas partners rather than Licensed
Manufacturing agreements with payments for
technology either through one time payment or royalty.
Why?

– JVs seemed a better Long term, “permanent” form of cooperation

– Both JV partners would derive benefit from the JV only if the JV

Company would have consistent profitable growth – therefore both
partners have a stake in seeing that the business is successful

– The JV offered the foreign partner a presence in India

Family Business - ISB, Hyderabad

 What works?
• Take a truly long term view – indefinite and
permanent
• Clear understanding and appreciation for each
partner’s objectives before forming the JV
– Take the time to get to know one another well
• Work together through informal arrangements or other lower
commitment forms of cooperation
– Form the JV only after you are sure you can indeed work
together.
• Fairness and Integrity
– Once formed ensure there is complete trust,
transparency and honesty in dealings
• Trust can be broken in an instant but takes a while to establish
(and even longer to re – establish once broken)

Family Business - ISB, Hyderabad

 What works?
• Keep the communication links open always
– Frequent formal and informal meetings
– We have found developing personal relationships and
friendships with JV partners to help greatly
• Deal with issues that come up promptly, and no matter
how small they may seem to be
– Several “Small” issues when taken together can become “Big”
issues that are more difficult to resolve.
• JVs can sometimes work better if the JV partner is
another Family Business.
• Apply similar guidelines when dealing with your JV
partner as you would to a spouse in a “marriage”
– Make your points and stand up for what is right but also be
gracious enough to compromise when needed

Family Business - ISB, Hyderabad

 What doesn’t?
• Long protracted negotiations when arriving at
a decision to form the JV

• One sided legal agreements that treat matters

as a “Zero Sum” game rather than “Win Win”
– where the interest of just one partner is considered over
that of the other.

• Inability to be flexible to review and redefine

the original objectives of the JV when needed

Family Business - ISB, Hyderabad

 Why JVs can be well suited for Family Businesses

• Many of the success criteria that you need to practice in

a successful Family Business are similar to what you
need in managing a successful JV, for example:

• Acceptance of the concept of “Equality” and looking out

for the interest of the other in the relationship

• Placing the overall interest of the Business above that

of an individual family member (i.e. treating the
business as an “heirloom” that you nurture and
preserve for future generations)

• There is often greater Continuity in Management in a

Family Business, where long term perspectives take
precedence over the short term, and this greatly helps
in a JV too.
Family Business - ISB, Hyderabad
 Some challenges, nevertheless….
• How do you manage a situation when you
have more than one JV where after a period of
time your JV partners begin to compete?

• What happens if one partner in a JV gets

acquired?

• How do you align the thinking and philosophy

of your subordinates with that of your own -
with respect to how they view the JV and the
interest of your JV partner?

Family Business - ISB, Hyderabad

 Thank You

Family Business - ISB, Hyderabad