Dealmaking Using Real Options and Monte Carlo Analysis [Hardcover]

Richard Razgaitis (Author)

Book Description

ISBN-10: 0471250481 | ISBN-13: 978-0471250487 | Publication Date: August 8, 2003 | Edition: 1

Applying practical tools to the volatile process of negotiating
Prognosticators apply Monte Carlo Analysis (MCA) to determine the likelihood and significance of a complete range of future outcomes; Real Options Analysis (ROA) can then be employed to develop pricing structures, or options, for such outcomes. Richard Razgaitis' Dealmaking shows readers how to apply these powerful valuation tools to a variety of business processes, such as pricing, negotiating, or living with a "deal," be it a technology license, and R&D partnership, or an outright sales agreement. Dealmaking distinguishes itself from other negotiating guides not only by treating negotiations as an increasingly common situation, but also by presenting a tool-based approach that creates flexible, practical valuation models. This forward-thinking guide includes a variety of checklists, case studies, and a CD-ROM with the appropriate software.
Richard Razgaitis (Bloomsbury, NJ) is a Managing Director at InteCap, Inc. He has over twenty-five years of experience working with the development, commercialization, and strategic management of technology, seventeen of which have been spent in the commercialization of intellectual property.

Editorial Reviews

From the Inside Flap

"The underlying purpose of this book is to empower negotiation for business-to-business dealmaking of business opportunities using analytical tools and planning procedures. The focus on practical tools and procedures that can be justifiably used in a business context distinguishes the book from a vast catalog of other negotiation books."
–From Chapter 1

Business negotiation is often characterized as a "take it or leave it" battle of wits between buyer and seller. But it is much, much more. In reality, business negotiation involves two parties–perhaps business adversaries or perhaps business allies–faced with reaching a reasonable value-enhancing agreement from a range of possible options.

Dealmaking Using Real Options and Monte Carlo Analysis details how you can employ two of today’s most powerful decision-making tools–Real Options Analysis (ROA) and Monte Carlo Analysis (MCA)–to effectively prepare for every negotiation by comprehensively and rationally representing myriad possible futures. This uniquely hands-on book outlines a step-by-step process for determining what you want, learning why it is reasonable to hold such a view, and successfully communicating that knowledge to both internal stakeholders and those on the other side of the negotiation.

Richard Razgaitis, an influential thought leader in the field of licensing and valuation, walks you through the tools and approaches of ROA/MCA joint usage, including:

• Real Options Analysis–sometimes referred to as "Black-Scholes" analysis, it is valuable for determining pricing structures, or options, for such outcomes
• Monte Carlo Analysis–an increasingly popular tool for determining the likelihood and significance of a complete range of future outcomes
• Checklists, case studies, web site addresses–for further business and negotiation resources

In the no-quarter world of business negotiation, a patient and methodical inquiry into all relevant matters is not practical. At the same time, rapid analysis may not provide the data required to satisfy all parties. What is needed is a model that takes into account the speed and urgency required to effectively prepare for a negotiation while allowing rational and defensible analysis of the numerous real options.

Dealmaking Using Real Options and Monte Carlo Analysis introduces that model. This practical, results-based book unveils a negotiating system that achieves the dual goals of speed and reasonable certainty, and is destined to become the method of choice for reaching outcomes designed to satisfy all parties in the negotiation.

From the Back Cover

An Innovative, Tool-Based Process for Creating More Rational, Creative, and Mutually Beneficial Deal Structures and Valuations

Real Options Analysis (ROA) and Monte Carlo Analysis (MCA) are two of today’s most significant tools in the valuation and negotiation of high-potential-value, high-ambiguity deals. Dealmaking Using Real Options and Monte Carlo Analysis outlines a new approach for creating flexible, practical valuation models by combining ROA and MCA into one innovative and proven successful process.

This results-based book takes you beyond uneven, rule-of-thumb negotiation tactics and strategies to discuss how you can:

• Accurately evaluate the potential costs of going forward with–or scuttling–a business project
• Ensure that both sides in every negotiation work from similar valuation terms and processes
• Develop and implement efficient strategies for bringing negotiations to closure

In preparing for any business negotiation, the goal is to identify opportunity and characterize risk; during the actual negotiation, the goal is to capture value while arriving at terms that are favorable to everyone. Dealmaking Using Real Options and Monte Carlo Analysis introduces a process for achieving both goals, by focusing on practical tools and procedures that take into account the full range of opportunities–and lead all sides to the identification and selection of optimal choices.

See all Editorial Reviews

Product Details

• Hardcover: 352 pages
• Publisher: Wiley; 1 edition (August 8, 2003)
• Language: English
• ISBN-10: 0471250481
• ISBN-13: 978-0471250487
• Product Dimensions: 9.3 x 6.3 x 1 inches
• Shipping Weight: 1.4 pounds (View shipping rates and policies)
• Average Customer Review: 3.5 out of 5 stars  See all reviews (4 customer reviews)
• Amazon Best Sellers Rank: #1,872,582 in Books (See Top 100 in Books)

More About the Author

Discover books, learn about writers, read author blogs, and more.

Customer Reviews

Most Helpful Customer Reviews

5 of 6 people found the following review helpful:

1.0 out of 5 stars Weak Attempt and Misapplied Theories, January 10, 2007

By 

John Smith - See all my reviews

This review is from: Dealmaking Using Real Options and Monte Carlo Analysis (Hardcover)

There are only 3 out of 12 pertinent chapters of this book. The other 9 chapters are an extraneous rambling to take up space on paper. The author even goes as far in this irrelevant material to discuss topics such as art collecting. The pertinent chapters are not useful because of misapplied theory. For example, the author does not present the Black-Scholes methodology correctly and improperly defines profitability of an "in-the-money" option. To me this is a marketing ploy through Decisioneering.

I recommend books by Johnathan Mun, Robert Hull, Richard Brealey, and the CBOT.

4 of 6 people found the following review helpful:

3.0 out of 5 stars Not too helpful, January 10, 2006

By 

C. Ang "cliff_ang" (Chicago, IL) - See all my reviews
(VINE VOICE)    (REAL NAME)   

This review is from: Dealmaking Using Real Options and Monte Carlo Analysis (Hardcover)

The title made buying the book interesting, but I was kind of disappointed when I purchased the book. For someone with a good quantitative background or some real experience dealing with real options and monte carlo simulation, this book would prove to be frustrating. It takes shortcuts by using (to the point of promoting) the Crystal Ball software by Decisioneering. Unfortunately, the book doesn't come with a trial software of Crystal Ball like some other real options books, so you only have to rely on the pictures in the book. Aside from this, the discussion of many topics is very watered-down. The author doesn't go in too much depth, and there is not much takeaway from this book. I suggest buying a different book for your needs.

5.0 out of 5 stars A Results-Based Approach, July 21, 2004

By 

Craig L. Howe "The Pointed Pundit" (Darien, CT United States) - See all my reviews
(VINE VOICE)    (REAL NAME)   

Amazon Verified Purchase

While preparing for a negotiation the objective is to identify risks and rewards. During the negotiation it is to capture value while finding terms value-enhancing terms agreeable to all parties.

Richard Razgaitis combines Real Option Analysis and Monte Carlo Analysis to provide practical tools and procedures. Used properly, these models will provide data that will assure quick, predictable and reasonable outcomes.