Playing at Acquisitions

LIST OF FIGURES vii
LIST OF TABLES ix
PREFACE xi
About This Book xi
Who Should Read This Book? Xii
A New Strategic Valuation Approach as a Bridge between Theory and Practice xiv
Academic Contribution and Features xvi
A Guide through the Book xviii
CHAPTER 1. LEARNING TO SEE, TO ADAPT TO, AND TO VALUE UNCERTAINTY 1
Learning to See Uncertainty 3
Learning to Adapt to Uncertainty 8
Learning to Value Uncertainty 11
Summary 15
PART I. LEARNING TO SEE UNCERTAINTY 17
CHAPTER 2. HOW TO DE-BIAS VALUATION OVER THE CYCLE 19
Problem Diagnosis: Why Acquisitions Occur in Go/No-Go Waves 20
Avoiding Irrational Infection of the Valuation Analysis 22
A Remedy for Uncertainty Neglect: Broaden Your Narrow View 25
Examples of Appropriate Real Options Thinking in Hot and Cold Deal Markets 32
Conclusions 41
CHAPTER 3. PLAYING AT SERIAL ACQUISITIONS: THE CASE OF VODAFONE 43
Six Potential Pitfalls in the Execution of a Serial Acquisition Strategy 44
Can Rational Analysis Discipline Strategy? 57
Dual Valuation of Growth Option Value to Avoid Irrational Infection 61
How to Use Option Games to Overcome Bidding Pitfalls 65
Conclusions 68
PART II. LEARNING TO ADAPT TO UNCERTAINTY 73
CHAPTER 4. STRATEGY AS OPTIONS GAMES 75
Classifying Acquisition Options under Competition 78
Expressing a Buy-and-Build Strategy as an Option Portfolio 81
Competition in the Bidding Game 87
Play Poker against Rivals Who Overshoot or Fall Asleep 93
Conclusions 95
CHAPTER 5. DUAL REAL OPTIONS VALUATION: THE XSTRATA CASE 101
Illustrative Example of the Dual Approach: Xstrata's Journey 103
Bottom-Up Framework: Xstrata's Serial Acquisitions 106
Top-Down Framework for Listed Companies: How Finance Can Enlighten Strategy 112
General Implications and Limitations 117
Conclusions 118
PART III. LEARNING TO VALUE UNCERTAINTY 121
CHAPTER 6. OPTION GAMES VALUATION 123
Designing and Solving an Option Bidding Game 124
Quantifying the Optionality of the Falconbridge Episode 133
Conclusions: How Option Games Can Deliver Their Potential 147
CHAPTER 7. CONCLUSION AND IMPLICATIONS 151
Biases and Options Are Everywhere 152
The Problem: Selected Pitfalls in Acquisition Decision Making 154
The Solution: How Executives Can De-bias Their Acquisition Decisions 158
Selected Implications to Deal Rationally with One's Own Biases,Financial Markets, and "Irrational" Rivals 163
Empirical Evidence 166
Promising Future Research Directions 169
Broaden Your View with Option Games 171
BIBLIOGRAPHY 173
INDEX 185