How to layout M&A risk in the initial structure?

Question

What are some differences between M&A, JV, synergy risk?

Answer 1

Ok, all of these are similar and related. But there are some nuances...

First: JV does not necessarily mean M&A - so some risks pertaining to M&A (getting to that later) will not apply to JVs

M&A risks I would call those directly related to the transaction. There could be myriads:

No shareholder approval
Financing falls apart
Regulatory / anti-trust approval is withheld or comes with very strict obligations (i.e. to divest a certain business, see Bayer <> Monsanto deal)
Change of control clauses in key supplier or customer contracts
No sufficient take rate for the acquisition offer to achieve a squeeze-out
In the case of (hostile) acquisitions, some poison pill move by the acquired company
Insufficient due diligence, so you buy at a high price due to some skeletons in the closet (pending class action lawsuits, some wrongdoing, ...)

Synergy risks I would characterize as those risks to achieving the projected synergies that ultimately justify the acquisition price:

Longer / more expensive integration of organisations, systems etc.
Key people leaving
People not leaving / more expensive lay-offs
Key customers leaving / shifting their buying strategy (i.e. because they don't want to be dependent on a single supplier)
Better bargaining position towards customers or suppliers does not materialize
Culture Clash
...

JV risks are similar in flavour to both (some related to the transaction, such as anti-trust) and some related to the operation of the joint company. I'd add a few more:

Governance: Decision making slow / unclear due to shareholder involvement
Intellectual property transfer (see China JVs)
No equal contribution from JV partners...
Your people don't want to work for the JV
Balance sheet consolidation: If it was a goal to get a certain business off your balance sheet (financing at-equity) then that may not happen if you set up the JV wrong / don't find a suitable partner

There are tons more, but these are some examples.