Table Of Content

ART OF THE DEAL Course No. 300H1F Fall 2004 MATERIALS Faculty of Law University of Toronto >■ These materials are exclusively for the classroom use of students of the University of Toronto Professor Harris SEP - j 2004 FACUtn Of Lm ART OF THE DEAL Course No. 300H1F Fall 2004 MATERIALS Faculty of Law University of Toronto These materials are exclusively for the classroom use of students of the University of Toronto Professor Harris Digitized by the Internet Archive in 2018 with funding from University of Toronto https://archive.org/details/artofdealcoursen00harr_1 Art of the Deal Fall 2(){)4 Table of Contents Page 1 TABLE OF CONTENTS Value Creation and Transaction Cost Eneineering Ronald J. Gilson, Value Creation by Business Lawyers: Legal Skills and Asset Pricing, 94 Yale LJ. 239 (1984), excerpts.1 Value Creation Through Contracting Business Research Corporation (A).17 Value Creation and Organizational Design Adolph Berle and Gardner Means, The Modern Corporation and Private Property (1932), pp. 119-123.47 Eugene F. Fama, Agency Problems and the Theory of the Firm, 88 J. OFPol. Econ. 288 (1980), excerpts.52 Eugene F. Fama and Michael C. Jensen, Separation of Ownership and Control, 26 J. OF L. AND Econ. 301 (1983).64 Mihnea Moldoveanu and Roger Martin, Agency Theory and the Design of Efficient Governance Mechanisms (February 2, 2001), pp. 1-10^.77 William A. Sahlman, The Structure and Governance of Venture Capital Organizations, 27 J. FIN. EcON. 473 (1990), excerpts.86 Value Creation and Capital Structure Paul Milgrom and John Roberts, Economics, Organization and Management (1992), ch. 15, pp. 505-7.118 Bengt Holmstrom and Jean Tirole, The Theory of the Firm 111 (Capital Structure), in Handbook of Industrial Organization, R. Schmalensee and R.D. Willing, eds. Ch. 2 (1989), pp. 79-86.120 Michael C. Jensen, Eclipse of the Public Corporation, Harvard BUS. Rev. 61 (September-October 1989).125 Rappaport, The Staying Power of the Public Corporation, Harvard Bus. Rev. 96 (January-February 1990).139 ' This short excerpt from a longer work summarizes and encapsulates the major insights from the preceding pieces in this section. Consider it optional reading if you have read the preceding pieces in this section. Art of the Deal Fall 2()()4 Table of Contents Paae 2 Bounded Rationality and Incomplete Contracts Paul Milgrom and John Roberts, Economics, Organization and Management (1992) ch. 5, pp. 126-149.148 Royce de R. Barondes, The Business Lawyer as Terrorist Transaction Cost Engineer, 69 FordhamL. Rev. 31 (2000), excerpts.160 Keith J. Crocker and Scott E. Masten, Pretia Ex Machina? Prices and Process in Long- Term Contracts, 34 J. OfL. &Econ. 69 (1991) (excerpts).174 Canada (Attorney General) v. Bitove Corp., 1995 CarswellOnt 1202 (Ont. Gen. Div.) (excerpts).183 Canada (Attorney General) v. Bitove Corp., 1998 CarswellOnt 2651 (Ont. C.A.) (excerpts).191 Adverse Selection Paul Milgrom and John Roberts, Economics, Organization and Management (1992) ch. 5, pp. 149-59.196 George Akerlof, The Market for Lemons”: Qualitative Uncertainty and the Market Mechanism, in READINGS IN THE ECONOMICS OF CONTRACT Law, Victor P. Goldberg ED. (1989), ch. 1.4.202 Lawrence M. Ausubel, Adverse Selection in the Credit Card Market (working paper, 1999), excerpts.205 Moral Hazard - Overview and Credit Lyonnais Paul Milgrom and John Roberts, Economics, Organization and Management (1992) ch. 6.219 Credit Lyonnais Bank Nederlands, N.V. v. Pathe Communications Corporation, 17 Del. j. Corp. L. 1099 (1991).235 Former MGM Chairman and CEO Arrested in Italy in $1.5 billion Entertainment Industry Fraud (October 12, 1999, www.usdoj.gov/usao/cac/pr/202b.htm).266 Former MGM Chairman/C.E.O. Agrees to Plead Guilty to Five Felony Charges Relating to $1.5 billion Fraud Involving Pathe's Takeover of MGM (October 19, 1999, www.usdoj.gOv/usao/cac/pr2001/150.html).269 ^ A play on "‘'deus ex machina'" or “god from the machine” - an improbable plot device that resolves a difficult situation. '‘‘Pretia" roughly translates to “prices”. Art of the Deal Fall 2004 Table of Contents Page 3 Adverse Selection and Moral Hazard - Acquisition Aereements and Closely-Held Corporations Ronald J. Gilson, Value Creation by Business Lawyers: Legal Skills and Asset Pricing, 94 Yale LJ. 239 (1984), pp. 269-280.272 James Freund, Anatomy of a Merger (1975), pp. 242-248.279 Precedent: Share Purchase Agreement (from Barry D. Lipson, The Art of the Corporate Deal (2000)).283 Frank Easterbrook and Daniel Fischel, The Economic Structure of Corporate Law (1991), pp. 228-232 and 238-243.299 Precedent: Shareholders’ Agreement - Shotgun Buy-Sell Clause (from O’Brien’s Encyclopedia of Forms (1987-)).302 Wittlin Bergman (1994), 19 O.R. (3d) 145 (Farley J.) (excerpts).311 V. Wittlin Bergman (1995), 25 O.R. (3d) 761 (C.A.) (excerpts).318 V. Information regarding Argosy Partners Ltd. “Shotgun Fund”.320 Option Theory and Arundel Partners Stephen A. Ross, Randolph W. Westerfield, Jeffrey Jaffe and Gordon S. Roberts, Corporate Finance (C^ Canadian Edition), ch. 21, excerpts.325 Arundel Partners — The Sequel Project.334 Incentive Contracts David Besanko et al.. Incentives and Agency, in The ECONOMICS OF Strategy, 2d ED. (1999), ch. 16.353 Precedent: Earn-out Provision.387 Art of the Deal Fall 2004 Table of Contents Pase 4 I Reputation Paul Milgrom and John Roberts, Economics, Organization and Management (1992), ch. 8, pp. 259-269.392 Ronald J. Gilson, Value Creation by Business Lawyers: Legal Skills and Asset Pricing, 94 Yale LJ. 239 (1984), pp. 280-293.398 Ronald J. Gilson and Reinier H. Kraakman, The Mechanisms of Market Efficiency, 70 Va. L.Rev. 549 (1984), pp. 613-622.405 Ronald J. Gilson and Reinier Kraakman, The Mechanisms of Market Efficiency Twenty Years Later: The Hindsight Bias, 28 J. OF CORPORATION L. 715 (2003), pp. 736-7.415 John C. Coffee, Jr, Understanding Enron: “It’s About the Gatekeepers, Stupid”, 57 Business Lawyer 1403 (2002).416 Negotiation Ron S. Fortgang, David A. Lax and James K. Sebenius, Negotiating the Spirit of the Deal, Harvard Business Review 66 (February 2003).426 David A. Lax and James K. Sebenius, The Negotiator’s Dilemma: Creating and Claiming Value, ch. 2 in The Manager as Negotiator: Bargaining for Cooperation and Competitive Gae^ (1986), pp. 29-45.436 Silicon Valley Case Study - Lawyering in the Boom Mark C. Suchman, Dealmakers and Counselors: Law Firms as Intermediaries in the Development of Silicon Valley, in Martin Kenney ed. UNDERSTANDING SILICON Valley: The Anatomy of an Entrepreneurial Region (2000), ch. 4, pp. 71- 97.445 Lisa Bernstein, The Silicon Valley Lawyer as Transaction Cost Engineer?, 74 Or. L. Rev. 239(1995).459 Joseph Bankman, The Structure of Silicon Valley Start-ups, 41 UCLAL. Rev. 1737 (1994), excerpts.472 John C. Coates IV, Explaining Variation in Takeover Defenses: Blame the Lawyers, 89 Calif. L. Rev. 1301 (2001), excerpts.486 Krysten Crawford, Defenseless, AMERICAN LAWYER (October 2001) 19.530 John C. Coates, Valley of the Excuses, AMERICAN LAWYER (January 2002) 14.533 Bonus Item - DonT Worry... Martin E.P. Seligman, Paul R. Verkuil and Terry H. Kang, Why Lawyers are Unhappy, 23 Cardozo L. Rev. 33 (2002).534