Large-scale mergers often plague the “winning” bidder with what academics call the “Winner’s Curse.” The winner’s curse takes place when a bidder does indeed win the object for which he or she was bidding, but the value of that object turns out to be less than what was bid for it. What’s a recipe for a winner’s curse in an M&A situation? Take one part highly visible transaction for a highly motivated, deep-pocketed acquirer. Add a bit of reluctant bride (or outright naysaying bride) on the part of the target firm. Add a potential white knight, preferably one that is despised by the original bidder. Throw in a couple (or more) hard-charging CEOs who view the deal as crucial to their company’s good fortunes (or to their own reputations — either will do). Finally, entrust the whole mixture to a bunch of sophisticated deal packagers on Wall Street. Then, make it front-page news on the publications that “everybody” reads.
Kraft, Cadbury, and Hershey: A Not-So-Sweet Deal?
Large-scale mergers often plague the “winning” bidder with what academics call the “Winner’s Curse.” The winner’s curse takes place when a bidder does indeed win the object for which he or she was bidding, but the value of that object turns out to be less than what was bid for it. What’s a recipe for […]
November 19, 2009