USE JOINT VENTURES TO EASE THE PAIN OF RESTRUCTURING

The proverbial ''dogs'' have been closed, and high-performing noncore businesses have gone to the highest bidders. For large corporations th at are refocusing their portfolios, the problem of how best to dispose of basically sound but underperforming businesses remains. Putting a business up for sale can be its kiss of death, with employee morale pl ummeting and prospective buyers unaware of the business's true potenti al value. The solution may be a restructuring joint venture, an arrang ement that allows the buyer to learn about the business's untapped pos sibilities before buying it outright, and that often results in higher returns to the seller than a straight sale would. The authors contras t the successful joint venture involving Whirlpool and Philips with th e disastrous results of Maytag's purchase of the Chicago Pacific Corpo ration. Restructuring joint ventures work especially well for business es whose assets are intangible and therefore hard for a potential buye r to gauge. In the case of IBM's Rolm Systems Division and Siemens of Germany, for instance, IBM sold outright that portion of the Rolm busi ness in which the primary assets were tangible and transferred the res t to Siemens through a joint venture. As this example also shows, buye rs often use the joint venture as an opportunity to enter new markets beyond their national borders. The management burden imposed by restru cturing joint ventures can be heavy, and the partners must plan carefu lly for the end of the alliance to avoid value-destroying conflicts. H owever, the benefits of these ventures can more than make up for the e ffort required.