AUTO INDUSTRY JOINT VENTURE DISPUTE

United States

Brief

In 2013, two companies in the automotive repair industry formed a joint venture by combining their existing businesses.  As part of the joint venture agreement, each party received equity corresponding with the fair market value of the business each party contributed, with one party receiving a controlling interest and the other receiving a non-controlling interest.  The agreement provided each party the right to exercise an option compelling the sale of the non-controlling interest to the party with the controlling interest.  The agreement specified the terms at which the option price was to be determined.

In 2017, the parties exercised the option agreement and calculated option exercise prices based on differing interpretations of the joint venture agreement.  In 2018, the parties entered arbitration to determine the appropriate option exercise price.

What we did

HKA was retained by counsel for the party with the controlling interest to calculate the option exercise price pursuant to the joint venture agreement.  We performed detailed financial analyses related to the put/call arrangements and valuation provisions in the joint venture agreement.  HKA also rebutted the option exercise price offered by the non-controlling interest holder.  The rebuttal analyses involved investigating the operational and industry impacts alleged by the non-controlling interest holder as bases for adjustments to the option exercise price.

Outcomes

The matter went to arbitration in 2018 and HKA experts offered testimony to a single arbitrator.  The arbitrator ultimately accepted HKA’s opinion regarding the option exercise price and rejected any adjustments proposed by the non-controlling member.

Project Details
  • Client
    Confidential
  • Year
    2018
  • Value
    Confidential
  • Services
    Expert, Forensic Accounting & Commercial Damages
  • Sectors
    Forensic Accounting & Commercial Damages