Joint Ventures in Out-of-Home Advertising: Common Legal Considerations
Joint ventures are frequently used in the out-of-home (OOH) advertising industry when parties seek to combine resources, share responsibilities, or pursue a specific opportunity. The underlying legal concepts are similar to joint ventures in other industries, but factual and operational considerations unique to the OOH context often dictate how these ventures take shape and are documented. The following points summarize issues commonly addressed when parties form a joint venture.
- Identifying the Agreement in Writing
Joint venture terms should be clearly documented in a written agreement that outlines the parties’ understanding. Written agreements create a single reference point for the parties and are most useful when they reflect the facts giving rise to the joint venture and the parties’ goals and expectations for the joint venture when it is formed and for the life of the relationship. This can help align the parties’ interpretations if circumstances or personnel change over time.
- Identifying the Parties
Participants in a joint venture may be composed of different kinds of parties, such as individuals, corporations, limited liability companies, partnerships, trusts, and or other entities. The structure of each participant and the joint venture may affect the allocation of responsibility. In many joint ventures, each party may be responsible for the actions or inactions of the others. The agreement typically specifies which entity is participating and the capacity in which it will act. Distinguishing between parent companies, subsidiaries, and affiliates is also helpful.
- Identifying Relevant Facts and Contributions
Each joint venture is premised on facts and circumstances that give reason for the collaboration. In the OOH industry, some of the more common issues or motivations involve substantial financial investment, hard and soft development costs, available capital, financing, obligatory participation agreements and revenue-sharing with local cities and counties, offering public benefits, the changing demographic and physical environment, allocation of responsibility, regulatory compliance, and permitting; just to name a few. The best agreements recite facts and objectives that help the parties (and third parties) more clearly understand the reasons for the joint venture and the parties’ respective participation.
- Identifying the Parties’ Objectives
Participants in a joint venture may enter the arrangement with different objectives. Some objectives relate to general business efficiencies, while others relate to specific OOH assets or development plans. Agreements commonly identify these objectives so the parties can detail how their interests align or can be made to align. When the parties review their respective objectives at the outset, they can evaluate compatibility before setting out the remaining terms.
- Out-of-Home Specific Considerations
OOH joint ventures may encounter industry-specific circumstances that are not as common in other sectors. These may include changes in visibility due to adjacent development, the effect of roadway projects, eminent domain proceedings, or the availability of necessary permits. Agreements often address how the joint venture will respond if these changed circumstances arise, presumptions prove inaccurate, or expectations are not met.
- Addressing Practical and Likely Contingencies
Joint venture agreements vary in length and detail. Some address only the most significant issues, while others comprehensively address a host of contingencies. The best agreements focus on occurrences that are reasonably likely or foreseeable, rather than marginally possible and unlikely. The agreement should give the parties a workable and functional framework for the parties’ cooperation and avoid unnecessary terms that do not serve the joint ventures’ needs.
The Role of Clarity
Clarity is central to the joint venture’s documented agreement. Precise identification of the parties, their contributions, their objectives, the factual basis for the venture, and the parties’ respective obligations helps establish a shared understanding of how the joint venture will operate. This clarity contributes to consistent interpretation, more predictable administration, and a smoother working relationship over time.
Legal Support for Joint Venture Documentation
Hamlin | Cody assists clients in the out-of-home industry with forming and documenting joint ventures, including preparing and reviewing agreements that reflect the parties’ objectives and responsibilities to one another for a successful venture.