Dealmaking : Using Real Options and Monte Carlo Analysis
""The underlying purpose of this book is to empower negotiation for business-to-business dealmaking of business opportunities using analytical tools and planning procedures. The focus on practical tools and procedures that can be justifiably used in a business context distinguishes the book from a vast catalog of other negotiation books.""--Chapter 1 Business negotiation is often characterized as a ""take it or leave it"" battle of wits between buyer and seller. But it is much, much more. In reality, business negotiation involves two parties-perhaps business adversaries or perhaps
1 online resource (308 pages)
9780471452010, 0471452017
1058976172
Dealmaking
Preface
Acknowledgments
About the Author
Contents
CHAPTER 1 Introduction
Why Another Negotiating Book?
(i)Dealmaking
High Significance, High Ambiguity Contexts
The "So What?" Question
Valuation, Pricing, and Negotiation
Tangible and Intangible Content/Value and the New Economy
The (i)Dealmaking Process
Organization of the Book
CHAPTER 2 Negotiation People, Language, and Frameworks
Negotiation People
A Quest
The Nut, the Number, the Bogie, and the Toe Tag
Quantification, Rationality, and Hyperrationality. CHAPTER 3 The Box and the Wheelbarrow: What Am I Selling (or Buying)?
The Box
The Wheelbarrow
(i)Dealmaking's Spine
The Term Sheet
Methods and Tools
CHAPTER 4 Discounted Cash Flow Analysis and Introduction to Monte Carlo Modeling
Discounted Cash Flow Analysis
Scenario (DCF) Analysis
Monte Carlo Method: An Introduction
Closure and Application to Negotiation
CHAPTER 5 Monte Carlo Method
A Model Cash Flow Template
Income and Cash Flow Statements: 3M Example
Monte Carlo Assumption Tools
Uniform Distribution: Highest Uncertainty Between Certain Bounds. Triangular Distribution
The Normal Distribution
Other Distribution Functions
Monte Carlo Model of the DCF Template
Combined CAGR and Cost Ratio Uncertainty Distributions
Correlating Assumptions
Additional Assumption Distributions
Twentieth (and Other) Percentile Valuations
Comparison of Monte Carlo Results with DCF (RAHR) Method
Scenario Modeling in Monte Carlo
Monte Carlo Tools for Determining Variable Significance
Final Points on the Monte Carlo Model. Appendix 5A: Crystal Ball Report Corresponding to the Results Presented in Exhibit 5.15 for a Uniform Cost Distribution Assumption
Appendix 5B: Crystal Ball Report Corresponding to the Results Presented in Exhibit 5.16 for a Double-Humped Cost Distribution Assumption
CHAPTER 6 Introduction to Real Options
Perspective 1: Discounted Cash Flow (DCF) View of the Six-Scenario Opportunity
Perspective 2: Real Option View of the Six-Scenario Opportunity
Perspective 3: A Model for a Buyer's Counteroffer
Black-Scholes Equation for Option Pricing. The Black-Scholes Equation Applied to an Option to a Share of Yahoo!
What Do Equations Represent? "What Is Truth?"
Using Black-Scholes for an Opportunity Valuation
Summary of Real Option Realities versus Black-Scholes
CHAPTER 7 Real Options Applied to Dealmaking
Beyond Black-Scholes
Emergence of Real Options Analysis
Introducing the Binomial Lattice for Real Options
Calculating Option Values from Binomial Matrices
Calculating Option Values Using Decisioneering's Real Options Analysis Toolkit
Using Real Options Analysis Toolkit Software in Dealmaking
Calculating (or Estimating) Option Volatility