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Follow up to the Valuation
Model:
Preamble: Valuation is an essential part of the decision-making
process. Before entering into any merger decision - indeed, any decision in
any field - the absence of a method of determining the value of
the execution of a decision prevents the making of informed
decisions.
In addition, valuation provides a benchmark for
measurement of results during periodic reviews.
2. Neither party should restrict, or attempt to
restrict, or compel, or attempt to compel, the activities of the other party.
Such action can only result in destruction of the
value sought in the entering of a relationship (as compared relative to
remaining single.)
The fact that the two parties are separate
entities with sovereignity over their internal management decisions and
actions must be recognized. Although this is by no means mandatory, enforcement of one party's will and
demands upon the other, although possible, is a
tenuous and draining process for both.
Bearing in mind the objective of
entering and being in any partnership is to achieve synergistic benefit which exceeds the sum of each pre-merger component taken individually, benchmarks are needed for review and evaluation of the
degree of benefit and value that has been added.
As is common in the decision-making process in any
field, the most straightforward, yet remarkably effective and insightful
benchmark is comparison with the 'do-nothing' scenario. In
which case here, means comparison to the scenario of being single.
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What implications does this have?
In practice, there is a high possibility that in
the course of a partnership, one party wishes the other's involvement in taking
up certain projects - in which conflict will occur if latter party has a
difference in opinion and disagrees to involvement. If agreement cannot be
reached, compulsion of the other party is not encouraged if the objective of
continued existence of this partnership is still intended. In which case the proposing
party has to go on with sole execution of the project.
In the case of independent projects, according to the model, this should
bring no more disadvantage to the proposing party than had the
project been carried out by the proposing party as a single,
pre-merger entity.
However, as for projects that definitely cannot be
carried out through separate effort (e.g. procreation)
- this brings one back to the initial stage of the merger decision - that is
when due diligence should have been carried out according to the Prudent Man
Rule, not only in evaluation of the content and veracity of the stated terms
and conditions as presented - but to identify the possibility of
divergence of management direction later into the partnership . Although
this by no means guarantees total success, a formal framework for the
decision-making process is nevertheless essential, especially in the resolution
of bedroom tussles.
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