Investment Analysis of Offshore Concessions in The Netherlands

Describes the valuation of a complex capital project, the staged development of an oil field concession in the Netherlands. Stages of offshore petroleum development on the Dutch continental shelf; Asset valuation based on replication in financial markets; Major insights and conclusions

Waarde en Ontwikkeling van Buyouts

Terwijl de grote golf van buyouts in de jaren tachtig voornamelijk tot doel had logge conglomeraten die aan zware agencyproblemen en inefficiënties onderhevig waren te herstructureren, werd de tweede grote golf in de jaren negentig tot 2001 veelal gekenmerkt door een totaal andere waardestuwer, namelijk het nastreven van groei. Na deze golf werd het door de economische stagnatie en de waardedaling van de financiële markten steeds moeilijker een exit route te vinden naar een strategische speler of de beurs, met een toename van het aantal secondary buyouts als gevolg. In dit artikel geef ik een overzicht van deze recente economische ontwikkelingen in de buyout-markt en stel ik een raamwerk voor dat deze ontwikkelingen relateert aan gevestigde economische theorieën. Dit waarderingsraamwerk van private overnames integreert de verschillende waardecreërende factoren met een waardering en geeft de mogelijkheid om ieder type buyout op correcte wijze te waarderen

A Real Option and a Game Theoretic Approach to Corporate Investment Strategy under Competition

Presents a real options and game-theoretic approach to corporate investment strategy under competition. Analysis of aspects of competition in a microeconomic framework; Forecasting of operating cash inflows based on economic rents or excess profits; Implications of results obtained

Real Options: Examples and Principles of Valuation and Strategy

The paper illustrates the use of real options and game theory principles to value prototypical investment projects and capture important competitive/strategic dimensions in a step-by-step analysis of investment decisions (options) under uncertainty. It first illustrates the application of real options principles to a mining concession and to an R&D program. It then provides examples from innovation cases and uses basic game theory principles to discuss other strategic and competitive aspects, especially applicable to oligopolistic industries like consumer electronics. The issue of whether (and when) it is optimal to compete independently or coordinate/collaborate (e.g., via joint R&D ventures or strategic alliances) is given particular attention

Playing at Serial Acquisitions

Behavioral biases can result in suboptimal acquisition decisions-with the potential for errors exacerbated in consolidating industries, where consolidators design serial acquisition strategies and fight escalating takeover battles for platform companies that may determine their future competitive position. To guide objective managerial judgment, and to rationally anticipate the irrational behavior of rival bidders or financial markets, this article proposes a modified option-game toolkit for serial acquisition strategy. It brings together insights from both strategy and finance, which quantify acquisition strategies, thus allowing executives to make rational intuitive decisions under uncertainty

The Economics of Private Equity

The development of theory about private equity during the last decades follows the pattern of economic development. While buyouts have found their origin in restructuring we observe more recently a trend of facilitating growth, where the firm and financier follow a path of acquisitions. A traditional valuation analysis approaches the investment problem from the perspective of a single transaction. New trends ask for an expanded valuation framework, not only to evaluate individual acquisitions but to shape the strategic thinking process. This address describes a framework for applying real options and game theory to strategy planning and valuation. It treats an acquisition strategy as a package of corporate real options, actively managed by the firm in a context of competitive responses or changing market conditions. Combining the quantitative options models developed in finance with game theory principles from economics and the qualitative insights from strategic management theory provides a richer framework that helps us better understand the restructuring of fragmented markets

Strategic Investment: Real Options and Games

Corporate finance and corporate strategy have long been seen as different sides of the same coin. Though both focus on the same broad problem, investment decision-making, the gap between the two sides--and between theory and practice--remains embarrassingly large. This book synthesizes cutting-edge developments in corporate finance and related fields--in particular, real options and game theory--to help bridge this gap. In clear, straightforward exposition and through numerous examples and applications from various industries, Han Smit and Lenos Trigeorgis set forth an extended valuation framework for competitive strategies. The book follows a problem-solving approach that synthesizes ideas from game theory, real options, and strategy. Thinking in terms of options-games can help managers address questions such as: When is it best to invest early to preempt competitive entry, and when to wait? Should a firm compete in R&D or adopt an accommodating stance? How does one value growth options or infrastructure investments? The authors provide a wide range of valuation examples, such as acquisition strategies, R&D investment in high-tech sectors, joint research ventures, product introductions in consumer electronics, infrastructure, and oil exploration investment. Representing a major step beyond standard real options or strategy analysis, and extending the power of real options and strategic thinking in a rigorous fashion, Strategic Investment will be an indispensable guide and resource for corporate managers, MBA students, and academics alike

De Private Equity Golf

In de laatste decennia heeft private equity zich ontwikkeld tot een belangrijke component van ondernemingsfi nanciering. Private equity is een bron van fi nanciering voor start-up ondernemingen, private middelgrote ondernemingen, ondernemingen die geherstructureerd worden of onder nemingen die hun beursnotering willen beëindigen. De ontwikkelingsgang van private equity kent een golfpatroon dat gekenmerkt wordt door perioden van expansie en perioden van verschansing. Dit artikel beschrijft aan de hand van de recente literatuur de privateequitygolf, en de consequenties voor de verschillende partijen in de markt voor private equity, zoals de ondernemingen die privaat gefi nancierd worden, de investeringsmaatschappijen en de verschaffers van privaat vermogen

Consolidation Waves

This paper explains why consolidation acquisitions occur in waves and it predicts the differing role each firm is likely to play in the consolidation game. We propose that whether a firm assumes the role of rival consolidator, target, or passive observer depends on the position of the firm relative to the entity that merges first. Our model predicts that an initial acquisition triggers a wave of follow-on acquisitions, where the process of asset accumulation by the consolidator is accelerated since the value of follow-on acquisitions is enhanced by the more concentrated industry structure. An initial consolidation can trigger a consolidating acquisition by a rival in a remote market segment, while some firms prefer to be a target and others remain passive observers that await the outcome of the consolidation process rather than merge amongst themselves. Fragmentation, demand uncertainty, and investment costs determine the timing of acquisitions

Private Equity Waves

This study presents a dynamic model for the private equity market in which information revelation and uncertainty rationally explain the cyclical pattern of investment flows into private equity. The net benefit of private equity over public equity is i) uncertain and ii) agents have private information about the benefits of their investment. When these distinguishing characteristics determine investment behavior in private equity markets, rational investment waves may arise endogenously. Investment behavior reveals private information on the benefits of private equity financing and may trigger a cascade when investors jump on the bandwagon and invest irrespective of their private information content. We argue that the procyclical behavior of private equity volumes is strengthened by the revelation of information on the benefits of private equity investments. The occurrence and length of such waves in the market for private equity depend on the capabilities of agents