JV Profit Share Protection
Hey all, im working for a family office and through a land acquisition deal we recently found ourselves being in an industry that we do not have prior experience in. We are currently in the process of evaluating potential technical/operational partners and will subsequently enter into a JV agreement whereby our partner will be responsible for the operations of the business.
My firm will be sleeping partners and we will both share the economic profits. Since we do not have the operational/industry background we are exposing ourselves to the risk that the partners could be fudging the numbers and making money through this. Its essentially all based on the merits of trust.
In the agreement, we will include tiered level management fee to the partners if KPIs are met, thus increasing their profit share. Asides this, are they any alternative structures that we can use to mitigate our risk (i.e. instead of profit share we could perhaps do FCF share)?
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