Consortium

A consortium (컨소시엄) is an association of two or more individuals, companies, organizations or governments (or any combination of these entities) with the objective of participating in a common activity or pooling their resources for achieving a common goal.

'Consortium' is a Latin word, meaning partnership, association or society.

History
Originally the term was used when two or more donor states form an entity to provide loans to developing countries. The inter-relationship between donor countries was considerably loose.

At consortia, the representatives of participant countries set the total amount, while the detailed terms and conditions were left to the bilateral negotiations between each donor country and the recipient.

The benefits of a consortium were:
 * To raise a huge amount of fund efficiently;
 * To avoid duplication of grants and promote efficient use of funds;
 * To rule out the probable intrusion of private intention of a sole grantor.

Commercial Use
A for-profit consortium is a group of banks that collaborate to make a loan — also known as a syndicate. This type of loan is more commonly known as a syndicated loan.

Nowadays the term is used to describe an entity which is formed by two or more businesses to attain a certain purpose to be selected as a preferred bidder of a large-scale construction or M&A project.

Airbus case
Airbus Industries ("Airbus") is a good example of how a consortium is used or misused.

Airbus was formed in 1970 as a consortium of aerospace manufacturers in Europe to combine and enhance the sales and marketing capacity of respective shareholders. The partner companies retained production and engineering assets. This arrangement led to inefficiencies due to the inherent conflicts of interest that the four partner companies faced; they were both shareholders of, and subcontractors to, the consortium. The companies collaborated on development of the Airbus range, but guarded the financial details of their own production activities and sought to maximize the transfer prices of their sub-assemblies.

To survive the competition with the U.S. rival, Boeing, in 2001, EADS (created by the merger of French, German and Spanish Airbus partner companies) and BAE Systems (the British partner company) transferred their Airbus production assets to a new company, Airbus SAS. In return, they got 80 percent and 20 percent shares respectively. BAE would later sell its share to EADS. So far, the outcome is much better than expected in developing and marketing new product lines.

Similar Concepts
When two or more persons intend to conduct business jointly for a same purpose, they usually choose one of the following entities;
 * Company or Corporation (회사/會社)
 * Special purpose company (SPC, 특수목적회사/特殊目的會社) established for such purpose as non-recourse financing, bankruptcy remoteness, tax reduction, or other purposes as approved by the relevant law.
 * Partnership (조합/組合)
 * Unincorporated company (법인격/法人格 없는 회사/會社)
 * Joint venture (합작회사/合作會社)
 * Association (협회/協會)
 * Syndication (신디케이션): Originally used to distribute articles, photos, etc. to member newspapers, later used to form a group of lenders.

A consortium will come out through a step-by-step review of the following questions:
 * 1) Does it need a juristic personality? If "Yes", it should be a company.
 * 2) Does it have a special purpose? If "Yes", it should be a special purpose company. Otherwise;
 * 3) Does it have a hierarchical structure? If "Yes", it should be a company or association.
 * 4) Does it have a partner(s) of other nationality? If "Yes", it should be a joint venture.
 * 5) Does it need to be well organized without juristic personality? If "Yes", it should be a partnership or association.
 * 6) Does it exist temporarily to attain a certain purpose? If "Yes", it should be a consortium.