Consortium — temporary collaboration for common goals
What is a consortium? - The definition
A consortium occurs when two or more companies join forces for a joint project while maintaining their economic, legal and organizational independence. The consortium is formed in order to achieve a common economic goal in a time-limited cooperation. Unlike a strategic alliance, it is limited to a specific project duration and dissolves after the project is completed.
Organizing a consortium
A consortium is led by a Consortium leader (also known as “Lead Manager”), who coordinates the distribution of tasks and represents the consortium externally. The role of consortium leader is usually chosen by mutual agreement between the members. In Switzerland, consortia fall under ordinary society law (Art. 530—551 OR). In doing so, consortia are still bound by the tax and legal requirements that correspond to their legal form without having to maintain a joint balance sheet or bookkeeping.
The consortium agreement
The basis of cooperation is consortium agreement, which determines rights and obligations, liability issues and the distribution of profits and risks. This contract can be drafted informally and ensures that all parties pursue the same goals and that regular cooperation is guaranteed.
Types and forms of a consortium
There are different ways in which a consortium can be organized:
- Interior consortium (Silent Consortium):
In the interior consortium, the consorts operate in the background. A consortium leader acts solely vis-à-vis customers, media and authorities. - external consortium (Open consortium):
In contrast, in an external consortium, each participating company is open to customers, with a joint lead manager leading the project.
Typical consortium types
Bidder-provider consortium
A consortium of this type is often created as part of public tenders, e.g. for construction projects that are to win the contract through a joint offer.
banking consortium
Banks form consortia to distribute risks associated with large financing across several credit institutions.
Industry consortium
Industrial companies use consortia to jointly develop standards or implement large projects, for example in research and development.
Example of a consortium in the real estate sector
A consortium in the real estate sector can consist of various players, such as construction companies and investors, who implement construction projects together. This is how Switzerland created the Rhystadt Consortium, which developed a former Ciba-Geigy (now Novartis) area of 160,000 m2 in Basel. As a result of the merger, project costs, financing and risks could be distributed among the parties involved.
Benefits of a consortium
- Risk diversification: Financial risks are shared through the involvement of several partners.
- resource sharing: By sharing resources, a consortium can handle projects that would be too extensive for individual partners.
- flexibility: The temporary nature of a consortium enables temporary and economic cooperation without a long-term commitment.
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