In an international arbitration, we assisted an exclusive distributor in Spain of high-tech healthcare products whose activity depended, to a very large extent, on a single brand (around 93% of the business for several years). After the termination of the relationship, the supplier began to sell and market directly in the territory and, in addition, restricted access to critical order management tools, aggravating the operational impact of the change.
The controversy was not only contractual: the economic core was that the supplier was going to continue benefiting from the “goodwill” and clientele created over more than a decade, while the distributor suddenly lost its ability to exploit that value and, at the same time, was left without a realistic period to reposition itself in the market. In sectors where trust, brand, and continuity of service are key, that “transfer” of clientele has a quantifiable cost.
Our assignment consisted of constructing a solid and understandable expert valuation for the court, structuring the damages in two coherent approaches: a “principal” valuation of the value of the lost clientele portfolio, and an “alternative” valuation based on specific breaches of contract (lack of notice, non-competition, etc.), complemented with sunk costs and interest.
In the principal valuation, we calculated the present value of the clientele portfolio using a DCF: we estimated the contribution margin attributable to the brand, projected its future generation over an average customer lifetime, and discounted those flows with a rate derived from CAPM (risk-free rate, beta, and market premium), incorporating inflation. This approach allowed us to arrive at a robust quantification of the economic value of the clientele, with a deliberately conservative approach.
In parallel, we accredited and quantified sunk costs directly linked to the business (stock and specific investments), to complete the patrimonial damage with verifiable evidence. In addition, in the alternative valuation, we incorporated compensation equivalent to one year of remuneration for lack of notice and for the violation of the non-competition period, and we added a goodwill/severance compensation in accordance with the regulations of the country for commercial agents, also limited to one year, calculated with averages of the last five years.
The result was a consistent quantification between both methods (principal and alternative), reinforcing the credibility of the analysis and avoiding dependence on a single hypothesis. In aggregate terms, our estimates placed the compensation including items of clientele, sunk costs, and interest, with a prudent approach (for example, maintaining the negative effect of 2020 in the averages).
In practice, this work gave the client an extraordinarily defensible expert basis: we connected facts, contract, and applicable regulations with a standard and transparent financial valuation, explained clearly and with conservative assumptions, to strongly support the claim and substantially improve its procedural and negotiating position.