In volatile times, European corporates often opt for joint ventures (JVs) instead of full mergers or acquisitions, and this “plan B” can create optionality for future dealmaking.

JVs and other similar structures, such as alliances and distribution deals, create ecosystems, which can generate deal pipelines for the future, according to Nadine Mirchandani, EY-Parthenon Global Deputy Leader.

JVs, which usually sit apart from the partners’ core businesses, can also be a way to retain more flexibility when exploring a new market or segment.

Moreover, it is typically easier to exit a JV via a sale to the other partner or to a third party than it is to attempt a carve-out, Sylvia Ebersberger, partner at DLA Piper, said.

The volume of new JVs in Europe has tended to correlate closely with macroeconomic uncertainties since the beginning of 2020, as previously reported by Mergermarket.

In conventional deal negotiations, buyers and sellers can be held back by valuation gaps and disagreements over risk allocations, particularly in difficult macro and geopolitical circumstances. However, both sides in JVs are likely to use similar valuation metrics, it added.

Large European corporates typically use JVs to move fast and gain technological capabilities, Ebersberger said.

For example, Daimler Truck and Volvo launched a software JV named Coretura in June. The alliance allows two large players to pool resources without attracting the same regulatory scrutiny that would be seen in a full-blown merger.

As Daimler Truck and Volvo’s strategies evolve in the years ahead, it would be logical to expect advisors to add the JV to the list of potential deals when they pitch the companies.

JVs spike in difficult years

In 2020, the year that COVID-19 spread around the world and was declared a global pandemic, Europe saw the launch of 38 JVs worth EUR 19.9bn in the full year (FY), Mergermarket data shows.

Volumes fell sharply to 34 alliances worth EUR 3.6bn in FY21 as the vaccines were rolled out and conventional dealmaking boomed.

After the Russian invasion of Ukraine caused a spike in inflation from February 2022, the data once again jumped to 36 JVs worth EUR 14.4bn for FY22. The data for FY23 remained high, with 34 alliances worth EUR 8.4bn.

As interest rates began to fall, though, the data for FY24 dropped sharply to 24 JVs worth just EUR 1.1bn.

However, after Donald Trump began his second term as US President in early 2025, his mercurial approach to tariffs has once again created the conditions for European JVs. There have been 22 JVs worth EUR 6.0bn in the year to date (YTD), which is 8.5x the volumes in YTD24.

Defence JVs

JVs are particularly common in Europe’s defence sector, which is growing fast as members of the North Atlantic Treaty Organization (NATO) ramp up military budgets.

These structures can be a useful tool for European defence companies that want to collaborate while complying with regulatory and national security requirements, Mathias Schulze Steinen, partner at DLA Piper, said.

“European defence companies need to reach scale to deliver the military capabilities politicians require and closer collaboration is an obvious way to achieve this.”

For example, in May, German defence company Rheinmetall established a JV for satellite production with Finnish satellite-based information service ICEYE.

European companies have also historically often used JVs to enter new markets in Asia and the Middle East. In certain jurisdictions, it can also be a legal requirement to work with a local partner, Murad Daghles, partner at DLA Piper, said.

“We are observing more interest from Middle Eastern strategic and financial investors to form JVs and partnerships with European firms as they are seeking to diversify their business models,” Daghles said.

The pipeline of potential new JVs includes RGtech, a Chinese bearing cage supplier, which is considering a JV in Europe to increase its global sales; and Solarcontainer, an Austria-based provider of mobile solar-power systems that is seeking strategic partners in Saudi Arabia and South Africa.

Dealmakers also expect JVs and partnerships to remain an important tool for funding research and development (R&D) in areas such as life sciences, software, and artificial intelligence (AI).

Corporate VC ecosystems

Relationships between corporates and start-ups that emerged through corporate venture capital (CVC) and open innovation projects can create ecosystems, which then see M&A activity in a similar vein.

One example is Balantia, a company founded in 2011 to help corporates reduce their emissions and costs. Energy company Iberdrola, which had invested in the company through its CVC PERSEO in 2019, announced a deal to buy out the remaining 80% of its capital in July 2024.

Although deals like this “can happen,” they are not part of the regular day-to-day workflows of CVCs, according to Marta Perez, a venture builder with PERSEO. She was responding to a question from Mergermarket at a panel in Barcelona organised by innovation advisory firm Mind the Bridge earlier this month.

Indeed, Wayra, Telefonica’s CVC, which was launched in 2011, has only ever closed two full acquisitions, Irene Gomez, CEO of Wayra, said in response to the same question. At the same time, the CVC is committed to avoiding situations where start-ups generate 80% of their income from one corporate client, she added.

Meanwhile, Alberto Onetti, chairman of Mind the Bridge, said that buying lots of start-ups is not necessarily the best use of CVC models. Instead, investments in start-ups should be used to gain insights on future trends, he said.

Although investments in start-ups might prove less fruitful for follow-up M&A than JVs between peers, there will be the odd exception now and then.