Please do not copy and paste from past post and need reference. Do not copy and
ID: 1134523 • Letter: P
Question
Please do not copy and paste from past post and need reference.
Do not copy and paste from past post please
Do not copy and paste from past post please Do not copy and paste from past post please
Describe an investment or potential investment your company (or one of your suppliers or customers) has made that is subject to post-investment hold-up. What could or does your company do to solve the hold-up problem and ensure the investment gets made? If possible (if data is available), compute the profit consequences of the solution.
Your initial post (2 - 3 paragraphs, with citations if appropriate)
Explanation / Answer
Investment hold up problem is a situation in which one among two parties (Buyer or seller) feels insecure and delays final contract. This could be because change in global or local micro or macro environment, mistrust among the parties etc.. My company recently planned to invest in a small startup. The company made due diligence of the startup and finally agreed to take 40% of stake in it. The founders of the startup agreed for the investment but delayed the final agreement. This was because of the fear that founders would lose power in the company board as my company had asked for board seat and the fear of interference in day to day work. After 2 to 3 months my company realized the problem and assured backing for founders and agreed to non-interference for day to day work. Finally deal got through.
Financial loss:
After the agreement, my company stopped expansion and the same money was kept aside for buying start up. This resulted in stagnation of growth of the company. generally my company used to grow at 2% month on month with revenue of $2 million. The investment was held up for 3months , hence my company approximately lost $120,000 in sales growth.