The Piggy Back contract is an interesting option for companies that are starting to export. It is a collaboration agreement with another company already established in the target country.
Characteristics of the Piggy Back contract
The Piggy Back contract is a collaboration agreement between two companies of the same country, by virtue of which one company (the rider), generally a SME, takes advantage of the structure of another company that is established in the target market or country (the carrier’s), in order to sell their products there.
This formula allows the use of a company’s distribution network to sell products in exchange for a commission. This is a very useful concerted export method, since it expands the business opportunities for a company.
Legally, it is an atypical contract that incorporates elements of distinct contractual figures. Elements of commission contracts, distribution and service leases are present. In any case, the ownership of the products is not transmitted between the assignor and transferee, since this only works as an intermediary.
Advantages of the Piggy Back contract for SME
- Reduced costs
- Accelerated access to the market
- Withdrawal from administrative and logistic operations
Advantages of the Piggy Back contract for the company already established
- Variable compensation on the sales of SME (between 3% and 20%)
- Fixed compensation that contributes to defraying the structure cost
- Expansion of the offer of products to their clients by incorporating those of SME
In order for this figure to be feasible in practice, it is necessary that the product that SME intends to export is compatible and not competitive with the products that have already been commercialised by the established company. On the other hand, the sale or only the prospection can be agreed on, as well as other accessory benefits such as consulting or training in favour of the SME.
This article is not considered as legal advice