Colin Barry

Lecture on Deals (EF, Thursday, Week 3)


There 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