155143064
Photograph by Evelyn Peyton—Getty Images

5 ways to find the right overseas partner

Aug 26, 2015

1. Weed out rookies

A company that has never collaborated with a U.S. business may not be ready to meet the quality standards you expect—especially in countries such as China—or may tend to hop from one opportunity to the next. Search for a partner that has experience in several other joint ventures and confirm that its previous collaborators were happy with how the deals turned out, advises Gordon Orr, head of China for McKinsey & Co. “You’ll lower the risk of a genuine misunderstanding down the road,” he says.

2. Look beneath the surface

Face time, though important, is no substitute for due diligence. Use a high-end database like Thomson Reuters World-Check or hire an investigations firm to uncover useful details such as past lawsuits. Otherwise, you risk teaming with shady partners or fakers who pretend to know the right people. “You won’t know who is connected to whom,” says Greg Cullison, a senior executive at Big Sky Associates, an operations management advisory firm in Charlotte and Washington, D.C. 

3. Do a bake-off

Don’t settle for a minimum viable partner because you’re so relieved to find anyone who passes a background check. Try out two contenders simultaneously, recommends Alex Schroder, founding principal of Prisma Group, a business development and investment firm with offices in Raleigh, N.C., and Shanghai that helps clients expand internationally. When Schroder’s firm used that approach in sourcing building materials, it quickly became clear that one supplier fell short. “Their quality wasn’t consistent,” Schroder recalls. “They also had some management turnover challenges.” Prisma ultimately formed a joint venture with the better firm.

4. Lose control

Be prepared to relinquish tactical decisions to foreign partners so they can move quickly on the ground. They know the local culture better than you do. That’s the approach Fred Crosetto has taken at Ammex, a Seattle-based dealer of disposable gloves with $90 million in annual revenue. It has had several fifty-fifty and minority partnerships in China. “Our success has been giving them the control to operate how they had to operate,” says Crosetto. You should be just as pragmatic.

5. Let Uncle Sam help you

The U.S. Department of Commerce’s Gold Key program is woefully undermarketed but has helped many firms find credible overseas partners. For fees starting at less than $1,000, the agency will select a group of possible partners for you and introduce you to them in person or via teleconference—vetting them thoroughly beforehand. “The U.S. Foreign Commercial Service team in Mexico told me they have even conducted site visits to make sure the locals were not shell companies,” says Cullison.

A version of this article appears in the September 1, 2015 issue of Fortune magazine.

All products and services featured are based solely on editorial selection. FORTUNE may receive compensation for some links to products and services on this website.

Quotes delayed at least 15 minutes. Market data provided by Interactive Data. ETF and Mutual Fund data provided by Morningstar, Inc. Dow Jones Terms & Conditions: http://www.djindexes.com/mdsidx/html/tandc/indexestandcs.html. S&P Index data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Terms & Conditions. Powered and implemented by Interactive Data Managed Solutions