Vital to seek legal advice when considering business collaboration - Angus MacLeod

The effects of the last 18 months have been devastating for many businesses, and some have been left with no option but to shut up shop. But all is not doom and gloom.

Angus MacLeod is Partner, Wright, Johnston & Mackenzie

Other businesses have been able to pivot to survive, overhauling their service offering in some instances, or moving online to reach customers amid ongoing lockdown restrictions. The pandemic forced many of us to take a step back and think about what is important in life, and as a result, some have taken the leap and started their own new business.

These are just some COVID factors which I believe have created more opportunities to collaborate and work with other businesses to fully take advantage of the economy’s bounce back.

There are a whole host of reasons that can lead to a business deciding to collaborate with others. For example, an entrepreneur may be trying to launch a new product or looking for a new route to market, and while they have some capability to get themselves there, they lack what’s needed to get over the line. They could look at hiring staff, or buying in a sub-contractor, but this involves a degree of investment which might not be feasible at that stage in the business cycle.

Collaborating with another business could be the perfect solution. Why not join up with others, and make the whole greater than the sum of the parts?

There are lots of models which allow businesses to collaborate to reach the market and generate profit. Setting up a joint venture is one, where two or more businesses come together to collaborate to achieve a particular objective.

Another example could be a company that wants to start exporting and decides to partner with another business that is already doing so with a different product. You might have two complementary products which can be better sold together, such as gin and tonic, or cheese and biscuits, for example.

While business collaboration is popular in the food and drink industry, there is also a great deal of opportunity to do so in tech, construction, engineering and others.

Collaboration can be a hugely positive step for many businesses, but some tend to shy away from it through fear of having ideas stolen or missing out on a fair share of profits relative to their contribution. They may even see other businesses as competitors, which can create a degree of reluctance to reach out in the first place.

That’s why it is vital to seek legal advice when considering business collaboration - to ensure the right paperwork and agreements are in place to prevent either party from being duped or getting into something that ultimately will not be suitable for their business.

Lawyers can also get involved at the very early stages to help identify suitable opportunities for collaboration, as well as arranging confidentiality agreements at the point of entering discussions with a potential new partner.

This can be particularly useful for those who know they need to collaborate in some way but are unsure how to progress. For example, if someone has developed a new manufacturing process or a piece of technology which isn’t necessarily a part of their core business, but they’d like to bring it to market, there may be another business out there looking for that exact thing.

In this scenario, we would work with both businesses to create a licensing agreement to ensure the people who developed the process or tech can profit from allowing another company to utilise their invention.

There are three key stages to business collaboration: identifying what your business has to offer, and ensuring it is properly protected; finding safe space to discuss and agree any potential partnerships; and formulating the partnership to ensure it is legally binding. Never get into a collaboration without a clear understanding of what constitutes success, and well-defined rules set down to sort out what happens if things don’t go to plan, or someone wants out.

If you are a business owner who thinks collaboration may be a good step, my advice would be to seek legal assistance at as early a stage as possible.

Angus MacLeod is Partner, Wright, Johnston & Mackenzie