In addition to the obvious tax structuring considerations, which can be particularly difficult to put in place in a consortium to align with a mix of private equity, U.S.-based strategic members and not based in the United States, it is appropriate, if there is an EEA link with the consortium, to consider at an early stage whether or not the consortium vehicle will be an alternative investment fund within the meaning of the AIFMD. and are therefore subject to continuous authorisation and authorization. An industrial research and development consortium has a different priority. It is a pooling of resources to study technological improvements that will benefit all participants. Often, this means that participants pay a small fee to a separate unit that manages the consortium and related research and development efforts. Regular meetings ensure that the intention of the participants is maintained and that all stakeholders are informed of progress and agree on all policy changes that can be proposed through intermediate outcomes. In the United States, the video streaming service Hulu is a consortium of major media companies such as Comcast, Time Warner, the Walt Disney Company and 21st Century Fox. Merriam-Webster`s definition is “an agreement, combination or group (from a company) that has been formed to undertake a business that exceeds a member`s resources.” The word is Latin, derived from “con” (together) and “exit” (Fate). In commercial industries that depend on technological development, a consortium can be a way to share the costs of research and development among several companies that would benefit from the resulting technology.
Consortia can also be commercial. Airbus, which was originally a consortium of European aerospace producers, would be an example. It eventually became a standalone company, Airbus, SAS. All members of the consortium should ensure that they understand the structure of their counterparties to ensure that resignations cannot be obtained through backdoor means. In particular, English law has raised serious doubts as to whether general prohibitions on indirect transfers or transfers of interest on shares offer sufficient protection. Each consortium member`s exposure to transaction costs and expenses should be determined quickly. In the case of a successful transaction, all costs should be borne by the consortium`s new vehicle, but if not – and if a demolition or pause fee is not payable by the seller – the costs must be divided between the consortium. This is usually done in proportion to interim capital commitments, with all withdrawn investors having to be subject to a tax and up to the date of withdrawal if the transaction fails. The diversity and combination of parties that meet in consortia is no longer limited to traditional club agreements, strategic joint ventures or passive co-investment paradigms.
Financial investors are increasingly willing to play a large number of roles, from the lead investor to the co-sponsor, the passive investor or co-investor, depending on the type of transaction, their own resources and know-how and the orientation of interests with other members of the group. The recent $4.8 billion acquisition of Merlin Entertainment was considered by Kirkbi, a strategic family investment firm, to be an equal partner with Blackstone and the Canada Pension Plan Investment Board. While consortia tend to share resources, they act independently when it comes to day-to-day business. In the case of a joint venture, two or more parties generally share ownership of a business, as well as risks, profits, losses and governance. Bidders in a competitive bidding process must be able to move quickly and decisively, which must avoid cumbersome decision-making processes to allow for a consistent and agile approach to the seller.