Deal World Rule #2 - Great Deals Maximize Whole Value

Great deals maximize Whole Value. A deal’s Whole Value is the deal’s potential (normalized to reality) less its costs (actual and intangible). It’s not an exact number but an informed relative value analysis.

To determine a deal’s potential (Reward) you analyze the Deal Value Drivers with the focus of an investment banker. Focus on cash flow relative to key factors:

*Cash Flow = is a term that refers to the amount of cash (or item of value e.g., exposure) being received and spent by a business tied to a specific deal.

To determine a deal’s costs (Risk) you analyze the Deal Value Drivers with the focus of an accountant that went to law school. Focus on the risk and expenses of generating the cash flow for the deal.

Rule 2 is about disciplined focus. During your next deal, focus on the deal’s Whole Value, as described herein. You will find that you have better understanding of what you want (and what you are being offered), which in turn, will direct your actions to achieve greater Whole Value.

In simple terms, its Reward vs Risk.