Joint Ventures in the Industrial Equipment Sector

A large industrial equipment company based outside Saudi Arabia aimed to establish a joint venture (JV) with a local partner to expand manufacturing and technology capabilities inside the Kingdom. The client sought to tap into Saudi Arabia’s increasing demand for heavy equipment, driven by infrastructure expansion, giga-projects, and industrial diversification. However, the organization lacked clarity on partnership models, ownership structures, local content implications, and compliance requirements under the Ministry of Investment (MISA) and local content authorities. They required comprehensive advisory support to design and negotiate a JV aligned with Saudi industrial policy.

We developed an end-to-end JV structuring solution covering partner due diligence, regulatory compliance, financial modeling, and governance framework design. The solution included a detailed mapping of potential Saudi partners, assessing each for manufacturing capabilities, financial stability, and alignment with local content mandates. We structured ownership options compliant with MISA regulations and designed governance models enabling transparent decision-making. Our financial analysis covered capital requirements, five-year profitability projections, scenario risk testing, and capacity expansion triggers. The result was a robust JV blueprint that maximized operational synergy, regulatory compliance, and commercial viability.

Key steps in our methodology included:

• Partner identification and screening based on technical capabilities and financial robustness.
• Regulatory navigation including MISA requirements, local content rules, and industrial licensing.
• JV financial modeling, forecasting revenue, operating costs, breakeven points, and capital schedules.
• Governance structure design outlining decision rights, dispute mechanisms, and board representation.
• Technology transfer framework, balancing knowledge sharing with intellectual property safeguards.
• Scenario testing to assess resilience under demand fluctuations and cost escalations.

We delivered a strategic roadmap including:

• Select a partner with manufacturing localization potential, reducing import reliance by up to 40%.
• Adopt a 60–40 ownership structure to maintain operational control while meeting local regulatory expectations.
• Implement a phased technology transfer plan ensuring capability growth without exposing proprietary risks.
• Establish KPIs for governance, covering productivity, financial discipline, and knowledge tracking.
• Apply incentive alignment mechanisms, including performance-linked JV reinvestment triggers.
• Optimize the JV’s capital structure to secure MISA approvals while minimizing financing risk.

The JV strategy produced strong financial outcomes, improving expected profitability by 22% through optimized procurement and localized production. Capital efficiency improved by SAR 14 million through phased capacity investments. Local content compliance unlocked preferential procurement access worth an estimated SAR 65 million over five years. Scenario testing reduced operational risk exposure by 33%, while structured governance improved decision-making speed by 40%. Overall, the JV framework enabled the client to establish a sustainable and competitive industrial presence in Saudi Arabia.