The anatomy of a joint venture tells you everything about how partners think about risk. Most structures are engineered in bull markets — designed to divide upside efficiently. The problem is that the real test of any JV structure is not how it performs when everything goes right, but how it holds together when it doesn't.
"Incentive misalignment doesn't show up at signing. It shows up at the worst possible moment — when the deal is under stress and partners need to make hard decisions together."
The Alignment Problem
The most common JV misalignment: an equity partner with a promoted interest has a strong incentive to push for a sale at a specific time horizon, while the operating partner benefits from an extended hold. These competing incentives — invisible at close — surface exactly when you can least afford friction.
A second common failure: capital call provisions that are asymmetric. When one partner can call capital and dilute the other on unfavorable terms, the structure has created a weapon that will eventually be used. Not because partners are bad actors, but because incentives are.
A Framework for Structural Alignment
What We Look For
At Michie Capital, we structure every joint venture with the assumption that stress will occur. Our documents define decision rights clearly, limit discretionary capital calls, and include operating covenants that protect principal while giving operators the flexibility they need to execute.
The goal is a structure that creates alignment — not just on paper, but through the cycle. A deal that only works when everything goes according to plan is not a deal. It is a bet.
For informational purposes only. Not investment advice. Michie Capital does not guarantee outcomes from any particular deal structure.