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Enhanced negotiations through minimization of valuation discrepancies.
Member rating: No Rating | Words: | Submitted: Mon Jun 19 2006
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Memorandum Sky Air Inc. To: Samuel Kaplan From: Date: Subject: Enhanced negotiations through minimization of valuation discrepancies This memo's intent is to illustrate how realistic negotiation expectations can minimize company valuation discrepancies. Successful corporate capital investment negotiations entail elastic demands and trade-off agreements that improve company value from the perspective of outside sources. The initial discussion will concern the significance of principle-agent relationships. Then the argument will shift focus to control and incentive issues, buyer and seller risks, explanation of valuation difference, opportunities to reduce the valuation differences, and summary negotiation recommendation. PRINCIPLE-AGENT RELATIONSHIPS Given Sky Air is currently a sole proprietorship, no principal-agent relationship exists. If sole ownership is relinquished, asymmetric information may lead to conflicts of interest between the contracting parties. Introducing an outside investor shifts the ownership from a self concerned sole proprietor to a manager that must evaluate how relevant actions may affect the additional party. CONTROL/INCENTIVES ISSUES Thyestean Venture's purchase of Sky air would...
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