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Beware the Winner's CurseVictories that Can Sink You and Your Company$
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G. Anandalingam and Henry C. Lucas

Print publication date: 2004

Print ISBN-13: 9780195177404

Published to Oxford Scholarship Online: September 2007

DOI: 10.1093/acprof:oso/9780195177404.001.0001

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Hubris and the urge to merge and acquire

Hubris and the urge to merge and acquire

(p.45) 3 Hubris and the urge to merge and acquire
Beware the Winner's Curse

G. Anandalingam (Contributor Webpage)

Henry C. Lucas

Oxford University Press

This chapter explores several famous mergers and shows how the victors became victims of the winner’s curse. It examines cases in which winner’s curse was apparent, and how it came about. In the analysis of failed mergers, it presents data on the pattern of acquisitions, the cost of acquisitions, the company’s stock price, and what happened to its financials over the five years leading up to its fall. As we look at several serial acquirers like Tyco, WorldCom, First Union Bank, and Bank One, it is argued that a history of success heightened the sense of winning and increased managerial optimism, hubris, and feelings of invulnerability, which all ultimately led to the winner’s curse. Particular attention is given to cases of intense competition, i.e., mergers involving hostile takeovers and instances where two firms competed with each other to acquire a third firm.

Keywords:   mergers, acquisitions, serial acquirers, Tyco, WorldCom, First Union Bank, Bank One

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