Lecture on Deals (EF, Thursday, Week 3)
entrepreneurial-financeyear-twoThere are omnipresent incentive problems that seem to come up in any agreement. But it's still worth thinking about how to minimize incentive problems.
Good example: Sergey Bubka (Olympian pole vaulter) had an endorsement contract that promised him a new Mercedes-Benz automobile each time he broke the world record for the pole vault. Sergey Bubka broke the world record for the pole vault 21 consecutive times during his 20-year career, each time by a centimeter.
Was this what Daimler-Benz had in mind?
There are a myriad set of ways that investors (VC or PE funds) capture pieces of the pie that they would not appear to merit.
Deal terms have a price. It is worth considering what that price is.
"If the seller set the price and I could negotiate the terms, we could always come to a deal. So the owner got his $2mn. He just got it a different way, over a different period of time." -- Jim Sharpe