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Deals: The Economic Structure of Business Transactions
Drawing on real-life cases from a wide range of industries, a sophisticated but accessible guide to business deals, designed to maximize value for any party to a transaction.
Business transactions take widely varying forms―from multibillion-dollar corporate mergers to patent licenses to the signing of an all-star quarterback. Yet every deal shares the same goal, or at least to maximize the joint value created and to distribute that value among the parties. Building on decades of experience teaching and advising on business deals, Michael Klausner and Guhan Subramanian show how to accomplish this goal through rigorous attention to designing incentives, conveying information, and specifying parties’ rights and obligations.
Deals captures the range of real-life transactional complexities with case studies covering Microsoft’s acquisition of LinkedIn, Scarlett Johansson’s contract dispute with Disney over the release of Black Widow , litigation surrounding LVMH’s pandemic-disrupted acquisition of Tiffany, the feud between George Norcross and Lewis Katz over ownership of the Philadelphia Inquirer , NBC/Viacom’s negotiation with Paramount over the final three seasons of Frasier , and many more. In clear, concise terms, Klausner and Subramanian establish the basic framework of negotiation and the economic concepts that must be addressed in order to maximize value. They show how to tackle challenges, such as information asymmetry between buyer and seller, moral hazard, and opportunistic behavior. And the authors lay out responses to common risks associated with long-term contracts, emphasizing that a deal’s exit rights should be carefully considered at the start of transaction design.
Unique in its practical application of economic theory to actual dealmaking, this book will be an indispensable resource for students and for professionals across the business and legal world.
Business transactions take widely varying forms―from multibillion-dollar corporate mergers to patent licenses to the signing of an all-star quarterback. Yet every deal shares the same goal, or at least to maximize the joint value created and to distribute that value among the parties. Building on decades of experience teaching and advising on business deals, Michael Klausner and Guhan Subramanian show how to accomplish this goal through rigorous attention to designing incentives, conveying information, and specifying parties’ rights and obligations.
Deals captures the range of real-life transactional complexities with case studies covering Microsoft’s acquisition of LinkedIn, Scarlett Johansson’s contract dispute with Disney over the release of Black Widow , litigation surrounding LVMH’s pandemic-disrupted acquisition of Tiffany, the feud between George Norcross and Lewis Katz over ownership of the Philadelphia Inquirer , NBC/Viacom’s negotiation with Paramount over the final three seasons of Frasier , and many more. In clear, concise terms, Klausner and Subramanian establish the basic framework of negotiation and the economic concepts that must be addressed in order to maximize value. They show how to tackle challenges, such as information asymmetry between buyer and seller, moral hazard, and opportunistic behavior. And the authors lay out responses to common risks associated with long-term contracts, emphasizing that a deal’s exit rights should be carefully considered at the start of transaction design.
Unique in its practical application of economic theory to actual dealmaking, this book will be an indispensable resource for students and for professionals across the business and legal world.
176 pages, Hardcover
Published March 19, 2024
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Displaying 1 - 4 of 4 reviews
February 1, 2026
Curated analysis of the incentives arriving from business contracts. Relatively short and touches upon a limited aperture of topics but covers them well through examples followed by analysis.
Takeaways:
- Ex-ante information asymmetries between buyer and seller have powerful impacts on the deal making process. A buyer must protect against the seller’s information advantage, and as a result sellers must behave with careful consideration for the way in which actions will be interpreted by the buyer
- Ex-post uncertainty and the way it is handled, is the most important quality of a strong contract. While impossible in practice, a great contract covers actions in the vast array of future states of the world.
- A ROFR, which gives a right to match any external bids in a sale process, can stymie the process as potential buyers must be convinced to do work. Additionally, at whatever price is chosen, the entity with the ROFR right has chosen not to invest. The buyer may not like having paid a price that an insider has decided was too high.
Takeaways:
- Ex-ante information asymmetries between buyer and seller have powerful impacts on the deal making process. A buyer must protect against the seller’s information advantage, and as a result sellers must behave with careful consideration for the way in which actions will be interpreted by the buyer
- Ex-post uncertainty and the way it is handled, is the most important quality of a strong contract. While impossible in practice, a great contract covers actions in the vast array of future states of the world.
- A ROFR, which gives a right to match any external bids in a sale process, can stymie the process as potential buyers must be convinced to do work. Additionally, at whatever price is chosen, the entity with the ROFR right has chosen not to invest. The buyer may not like having paid a price that an insider has decided was too high.
March 18, 2025
6,5/10 Zeer interessant boek voor mensen die geïnteresseerd zijn in zowel de juridische als de economische kant van overeenkomsten. Het is perfect om de basis van dealmaking te begrijpen en alle aspecten die ermee gepaard gaan maar als je al bepaalde kennis hebt over het onderwerp kan het soms te oppervlakkig voelen. Het is een goede syllabus die uitleg geeft over overeenkomsten, vanaf de eerste onderhandelingen tot het einde van een overeenkomst waarbij telkens veel echte voorbeelden worden gegeven om het nog duidelijker te maken.
July 26, 2024
Concise book designed as a textbook for the introductory part of the classic Columbia Law School "deals course," written by the people who adapted that course for classes at Stanford. Good discussion, laden with real-world examples, of how better designed contracts can increase value for both sides. Good for students or transactional lawyers. Not for litigators.
November 26, 2024
A refreshing take on the economic theories behind the inner workings of contract development. Employs some excellent case studies.
Displaying 1 - 4 of 4 reviews