However, once executives have their mind firmly set on acquiring a particular target but are outbid by a rival, this may be difficult to swallow. Often, it seems to awaken the warrior in them; they go back to their people and instruct them to �find me another 100 million or so in synergies� in the target�s books, which enables them to up the bid. For instance, we saw indications of this when Mittal was bidding for Arcelor, and it is hardly a sporadic event.
Clearly, this is a dangerous phase in a bidding process. Copious research, for instance on �escalation of commitment� in M&A deals, has indicated that overexcited executives have a tendency to not walk away from a deal when they should, mysteriously uncovering extra value in a transaction when a firm�s rivals are starting to outbid.
But I guess this bit is only human. It is the part that comes after that which always gets me. The company that ultimately �wins� the bidding war is declared the winner � in newspapers, business magazines, etc. They pop the champagne and celebrate, while the loser pouts and has a crisis meeting.
But are we sure that you are the �winner� when you just paid 300 million for a company you originally calculated was worth half of that�? And are you sure you really are the loser when you just made your competitor pay 150 million more than the darn thing is worth�? Somehow, I am not so sure, no matter what the newspapers say.
