Darryl Laws

  It is well known in the game theory that rational behavior of rational people can lead to collective irrationality, which gives rise to the argument that the solution to the conflict between individual rationality and collective rationality does not lie in the denying of individual rationality, but instead in the designing of a mechanism in order to reach collective rationality based on individual rationality (Zhang, 1996). Game theory modeling provides an insight into strategic human behavior interaction, rational and irrational, during in merger / acquisition negotiations of transactions with significant economic  outcomes. Contemporary game theory has two forms: non-co-operative game theory (Nash 1951) and co-operative game theory (Von Neumann and Morgenstern 1944; Shapley 1953; Shapley 1977; Shapley and Shubik 1954; Luce and Raiffa 1957; Aumann and Drèze 1974; Myerson 1977). Von Neumann and Morgenstern (1944) and Nash (1950; 1951) have suggested two game theory approache...

  Each participant will possess more than fifteen (15) years mergers and acquisitions experience in his / her respective filed of: M&A law, M&A corporate finance, M&A transactional structuring and mergers and acquisitions negotiation tactics and strategies with firsthand experience in working with and dealing with irrational human behaviors such as CEO overconfidence and exuberance. When conducting the five (5)  interviews the researcher will use a non-participant style as such as not to influence verbal responses and non-verbal reactions to open-ended questions. Directive input will only be used IF the researcher requires greater clarity to a response provided that the interviewee(s) is willing. The researcher will field test a sample questionnaire with several of his own private equity fund’s managing directors in order to ascertain whether or not the questions constructed for use in the study are situationally relevant and to ensure that the data extracted from ...

  Methodology design and methodology selection justification. John Criswell’s 5 th edition of Research Design, Qualitative, Quantitative and Mixed Methods Approaches, (2018), pgs. 13 and 122, Creswell states that qualitative designs using grounded theory is inquiry in which the researcher derives an abstract theory ground in the view of participants and further indicates that this process involves multiple stages of data collection and refinement of the interrelationships of the categories of information. He cites Charmaz 2006; Corbin & Strauss 2015. In compliment on Creswell (2018) states (pg. 122) that a quantitative purpose statement begins with identifying the proposed major variables in a study (independent, intervening, dependent) and their relationship, the participants and the research site; thus my selection of the use of a convergent mixed methods research design (Creswell, 2018, pg. 218-219) is appropriate to gain the valuable insight of practitioners using qualitat...

  20 / 20 Hindsight bias. 20 / 20 Hindsight bias, or alternatively they knew it-all-along effect and creeping determinism, is the inclination to see events that have already occurred as being more predictable than they were before they took place. It is a multifaceted phenomenon that can affect different stages of designs, processes, contexts, and situations. Hindsight bias may cause memory distortion, where the recollection and reconstruction of content can lead to false theoretical outcomes. It has been suggested that the effect can cause extreme methodological problems while trying to analyze, understand, and interpret results in M&A activities. A basic example of the hindsight bias is when a CEO believes that after viewing the outcome of a potentially unattractive merger that they knew it all along. Risk aversion. Aversion to losses is a central feature of prospect theory . Prospect theory is based on experimental evidence, of how people evaluate risk, Kateeinan and Tversk...

  Escalation of commitment / a.k.a. sunk cost fallacy. Escalation of commitment refers to the psychological condition whereby people continue to support or believe in something that is repetitively failing. In managerial decision-making escalation of commitment can refer to either continuing with a high-priced M&A bid. It may also refer to overestimating one’s own managerial capacity or ability. This is an extension of problem solving where the CEO does not accept they do not have a solution or they have to let go. With escalation of commitment there is a compulsion to not let go. Escalation of commitment was first described by Barry M. Staw (1976) in his article, Knee deep in the big muddy: A study of escalating commitment to a chosen course of action . More recently the term sunk cost fallacy has been used to describe the phenomenon where CEO justify increased investment in a merger / acquisition based on the cumulative prior investment, despite new evidence suggesting that ...

  Winner’s curse. Originally this euphemism was coined by oil companies bidding for offshore oil rights in the Gulf of Mexico,   the winner’s curses is a tendency for the winning bid in an acquisition to exceed the intrinsic value of the target company purchased is quite prevalent. Because of incomplete information, emotions or any other number of factors regarding the target company being acquired, bidders can have a difficult time determining the target’s intrinsic value. As a result, the largest overestimation of a firm’s value ends up winning the auction. When several bidders compete for the acquisition of the same target company, they may not know the target’s exact value. Where good  information in regard to the target company’s value is difficult to come by, or just uncertain, bidders are obliged to fall back on trying to estimate its value independently. When the company is worth the same to all bidders, the only thing that  distinguishes them will be their r...