INSTITUTIONS · NETWORKS · TRUST
Why the soft factors are often the hardest ones to get wrong
Institutional quality, trust networks and informal governance rarely show up in a data room, and they are often exactly what determines whether a deal that looks clean on paper actually works in practice.
Where this matters, by seat
Investors entering new markets
Whether a founder’s credibility with local partners is as strong as it looks in a pitch.
Corporates in a joint venture
Whether a partner’s informal decision-making actually matches the governance structure on paper.
M&A teams
Why some deals with clean financials still fail at integration, for reasons no spreadsheet captured.
FRAMEWORK
What institutional and network factors to check
Informal trust vs formal contracts
Whether the written agreement is actually how decisions will get made, or a formality.
Family & ownership structures
Who really controls a decision behind the official cap table or org chart.
Local institutional quality
How reliably contracts get enforced and disputes get resolved in that specific market.
Governance fit
Whether a Western-style board structure will actually function the way it does on paper.
EXAMPLE
A joint venture that worked on paper and stalled in practice
Context. Two companies structured a joint venture with a clean 50/50 governance agreement and a clear decision-making process written into the contract.
Analysis. In practice, one partner’s actual decisions ran through an informal family network that the formal board structure did not reflect, so board votes were consistently pre-decided before meetings happened.
Output. Renegotiating governance to formally include the people actually making decisions, rather than the names on the cap table, unblocked the venture within a quarter.
The bottom line
A governance agreement only works if it matches how decisions actually get made on the ground. Diligence that stops at the contract, without asking who really has influence, misses the part of the deal most likely to break it.
The lesson. Map who actually holds influence before finalizing a governance structure, not just who holds the title.
