Friday, March 25, 2011
valuations in M&A
http://mytoday.com/u/1846 : Mergers & Valuations.
---------------------------------------------
Plenty of merger deals should never happen: Buyers are too often attracted to "false positives" in targets that are overvalued. Less noticed are the deals that get away, but shouldn't, because of "false negatives" -- an undervaluation based on outdated methodologies that leads to a losing bid. The true value of a target company can be determined only if the buyer looks beyond current core operations to include future potential, argue three M&A experts.
What are often overlooked, though, are the deals that could have been big wins but didn't happen, because of false negatives. By that we mean instances, such as the one faced by Bank X, in which a much-needed acquisition was lost due to analytical and valuation methodologies that we think are outdated.
----------------------------------
The problem that we hope to mitigate stems from the pressure to make deals pay off quickly in terms of earnings per share, a goal that creates a systematic bias to discount value creation that is tied to future time horizons.
-----------------------------------------------------------------------
necessitate a valuation methodology that takes into account more than the net present value (NPV) of the target. We call this the Opportunity Value (OV) of an asset. OV allows us to consider the potential upside of an acquisition through a disciplined analysis that is based on range estimates relating to how the future might unfold. Because OV provides a positive view of uncertainty, itcomplements the NPV, which treats uncertainty negatively, and the two together provide an inclusive but not inflated valuation.
---------------------------------------------------
Labels: Knowledge at Wharton
Sunday, March 06, 2011
creativity kills leaderships?
http://mytoday.com/u/1801
--------------------------------
Creativity mars leadership potential ?
http://mytoday.com/u/1801
--------------------------------------------------------------------------------
Mueller and co-authors Jack A. Goncalo of Cornell and Dishan Kamdar of ISB undertook three studies to examine how creative people were viewed by colleagues. The troubling finding: Those individuals who expressed more creative ideas were viewed as having less, not more, leadership potential.
--------------------------------------------------------------------
But understanding the need for creativity within a large company is not the same as actually fostering it. Indeed, Mueller's work shows that those who think outside the box may be penalized for it.
------------------------------------------------------------------------------------------
"By definition, people will say creativity is positive," Mueller states. "It is almost impossible to get people to say they don't want creativity. But when someone actually voices a creative idea, there is a response of, 'Wow -- What is that?' This issue really comes to life at the moment the idea is voiced. There is discomfort when people encounter creativity."
---------------------------------------------------------------------------
The value that leaders have for groups is in creating common goals so the group can achieve something," Mueller notes. "And goals are better the clearer they are -- you don't want uncertainty. So leaders need to diminish uncertainty and create standards of behavior for everyone in the group. And they create those standards by conforming to them."
