Han Smit and Thras Moraitis
- Published in print:
- 2015
- Published Online:
- October 2017
- ISBN:
- 9780691140001
- eISBN:
- 9781400852178
- Item type:
- book
- Publisher:
- Princeton University Press
- DOI:
- 10.23943/princeton/9780691140001.001.0001
- Subject:
- Business and Management, Knowledge Management
It is widely accepted that a large proportion of acquisition strategies fail to deliver the expected value. Globalizing markets characterized by growing uncertainty, together with the advent of new ...
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It is widely accepted that a large proportion of acquisition strategies fail to deliver the expected value. Globalizing markets characterized by growing uncertainty, together with the advent of new competitors, are further complicating the task of valuing acquisitions. Too often, managers rely on flawed valuation models or their intuition and experience when making risky investment decisions, exposing their companies to potentially costly pitfalls. This book provides managers with a powerful methodology for designing and executing successful acquisition strategies. The book tackles the myriad executive biases that infect decision making at every stage of the acquisition process, and the inadequacy of current valuation approaches to help mitigate these biases and more realistically represent value in uncertain environments. Bringing together the latest advances in behavioral finance, real option valuation, and game theory, this book explains how to express acquisition strategies as sets of real options, explicitly introducing uncertainty and future optionality into acquisition strategy design. It shows how to incorporate the competitive dynamics that exist in different acquisition contexts, acknowledge and even embrace uncertainty, identify the value of the real options embedded in targets, and more. Rooted in economic theory and featuring numerous real-world case studies, the book will enhance the ability of CEOs and their teams to derive value from their acquisition strategies, and is also an ideal resource for researchers and MBAs.Less
It is widely accepted that a large proportion of acquisition strategies fail to deliver the expected value. Globalizing markets characterized by growing uncertainty, together with the advent of new competitors, are further complicating the task of valuing acquisitions. Too often, managers rely on flawed valuation models or their intuition and experience when making risky investment decisions, exposing their companies to potentially costly pitfalls. This book provides managers with a powerful methodology for designing and executing successful acquisition strategies. The book tackles the myriad executive biases that infect decision making at every stage of the acquisition process, and the inadequacy of current valuation approaches to help mitigate these biases and more realistically represent value in uncertain environments. Bringing together the latest advances in behavioral finance, real option valuation, and game theory, this book explains how to express acquisition strategies as sets of real options, explicitly introducing uncertainty and future optionality into acquisition strategy design. It shows how to incorporate the competitive dynamics that exist in different acquisition contexts, acknowledge and even embrace uncertainty, identify the value of the real options embedded in targets, and more. Rooted in economic theory and featuring numerous real-world case studies, the book will enhance the ability of CEOs and their teams to derive value from their acquisition strategies, and is also an ideal resource for researchers and MBAs.
Michael M. Weinstein and Ralph M. Bradburd
- Published in print:
- 2013
- Published Online:
- November 2015
- ISBN:
- 9780231158367
- eISBN:
- 9780231535243
- Item type:
- chapter
- Publisher:
- Columbia University Press
- DOI:
- 10.7312/columbia/9780231158367.003.0012
- Subject:
- Business and Management, Strategy
This chapter discusses the issue of risk management in Relentless Monetization (RM), the fact that philanthropists cannot know for sure the impact of their interventions. The following broad points ...
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This chapter discusses the issue of risk management in Relentless Monetization (RM), the fact that philanthropists cannot know for sure the impact of their interventions. The following broad points are considered: funders, to best fulfill their missions, need to take account of the risks that their decisions impose on the intended beneficiaries—an obligation known as the “good steward” responsibility; when addressing issues of risk, funders might well resort to simple rules of thumb; for large grants that impose sizeable risks for the funder's intended beneficiaries, RM sets out a more elaborate conceptual framework; the notion of “real options valuation,” a fundamental feature of the literature on managing financial risk, can be usefully applied to philanthropic decisions; the notion of game changers—investments that substantially alter the economic landscape of which they are a part—can be usefully applied to philanthropic decisions.Less
This chapter discusses the issue of risk management in Relentless Monetization (RM), the fact that philanthropists cannot know for sure the impact of their interventions. The following broad points are considered: funders, to best fulfill their missions, need to take account of the risks that their decisions impose on the intended beneficiaries—an obligation known as the “good steward” responsibility; when addressing issues of risk, funders might well resort to simple rules of thumb; for large grants that impose sizeable risks for the funder's intended beneficiaries, RM sets out a more elaborate conceptual framework; the notion of “real options valuation,” a fundamental feature of the literature on managing financial risk, can be usefully applied to philanthropic decisions; the notion of game changers—investments that substantially alter the economic landscape of which they are a part—can be usefully applied to philanthropic decisions.
