Max Mednik
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Readings and musings

Lessons Learned from Week 6 of Fall Quarter

11/4/2011

3 Comments

 
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Ethics
  • Corporation can have a conscience. Maximizing profit not always right or sufficient.
  • Written beliefs + implementation
  • Responsible use of bankruptcy as a tool in business

Behavioral finance
  • You can get rich trading on irrational signals by simply being lucky and trading before others to whom you sell out to later (and who are more naive than you).
  • Behavioral corporate finance perspectives: biased managers/rational markets or sophisticated managers/emotional markets
  • Overconfident CEOs (as measured by holders/non-exercisers of options whose price is 167% in the money) prefer to finance corporate investment with internal cash.
  • After a CEO wins an award, the recognition distracts from their jobs (e.g., writing books) and do poorly thereafter (and are more likely to manipulate earnings).
  • Overconfident CEOs initiate too many mergers, and most mergers fail to produce synergies. Ego battles lead to overpayment.

Doing deals
  • Medical device acquisition by lower middle market PE firm
  • Securities Purchase Agreement vs. Asset Purchase Agreement (Reps & Warranties, Indemnification, Dispute Resolution)
  • Earnouts: pros and cons
  • Be skeptical of management financial statements
  • Rollover equity: pros and cons
  • LOIs, exclusivity, control
3 Comments
Mikhail Strukov
11/12/2011 05:19:15 pm

Max, I love you summaries. Keep them coming!

Reply
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