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Good arrangement for the two firms

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Reference no: EM132965626

Mesilla Valley Trucking (a large national truckload carrier) was approached by Oil Patch Trucking (a small regional oil field services trucking firm) to help them meet their contractual obligations to Big Oil Company in the Permian in Eastern New Mexico. Oil Patch Trucking has struggled to find drivers and capital to purchase the specialized trucks needed for their saltwater disposal contract. Mesilla Valley Trucking (MVT) has not worked in the oil field before. Oil Patch Trucking will have to train and coach MVT on saltwater disposal operations and on the specialized asset purchase. Oil Patch Trucking proposed that the two companies split a recently signed $100 million contract with projected 20% margins to provide service over the next 5 years. It is likely that Oil Patch Trucking will default on the contract without MVT or a similar firm's assistance.

Is this a good arrangement for the two firms? Why or why not? How should they structure the agreement.

Reference no: EM132965626

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