Accuracy advises in a telecommunications joint venture dispute

Business case

Accuracy advises in a telecommunications joint venture dispute

Context

Our client, a Middle Eastern group involved in retailing telecommunications products (the “Claimant”), entered into a joint venture (JV) with a large Indian retail group (the “Respondent”) to explore opportunities in the Indian market. The JV was established to conduct the procurement and wholesale of telecommunications products and the Respondent was to provide an exclusive retail channel to sell the goods. Since its inception, the JV faced operational and commercial difficulties, and after a few years the JV partners agreed on a turnaround plan. However, prior to the implementation of the turnaround plan, the Respondent allegedly discontinued the exclusive retail channel for the JV. The JV was therefore rendered unviable. We were engaged to determine the value of the JV but for the alleged discontinuation of the retail channel by the Respondent, and assuming the turnaround plan had been implemented.

Key Takeaway

The Respondent also alleged breaches of the JV agreement by our client and counter-claimed damages. We assisted our client and their legal counsel in reviewing the counter-claim and challenged the Respondent’s report on technical grounds. We then prepared a second expert report in response to the Respondent’s counter-claim. Our main added value in this engagement was giving an independent view on the valuation of the JV and handling the client’s expectation on the quantum of the damages to keep it realistic and reasonable. Finally, we were involved in witness conferencing and gave evidence during the hearings.

Accuracy Role

We were instructed by legal counsel to assist our client in determining the damage suffered from the loss of profit, lost business opportunity, damage to reputation and loss of goodwill. To this end, our client shared with us the historical performance of the JV, independent market studies on the sector’s prospects and details of the turnaround plan. The client prepared a business plan, assuming that the retail channel would continue and the agreed turnaround plan would be implemented. The client further projected the performance of the business using the growth rates indicated in the market studies. We challenged our client’s business plan and obtained corroborative and empirical evidence to support their assumptions. We then conducted a valuation of the JV based on the business plan prepared by Management. As the JV’s business was rendered unviable in the actual situation, we prepared an expert report indicating that the damage suffered by our client was the difference between the valuation based on the business plan and the valuation of the unviable business (i.e. nil).