You may recall the Gourmet Adventures exercise on the winners’ curse in M&A. This is a nice exercise to emphasize the risk of overbidding in M&A. Elisa Operti has taken this a step further. She writes: “I love using the Gourmet Adventures exercise in my Corporate Strategy course. I have been teaching in France and Italy in recent years. Thus, I developed a European version of the game (see the Aventures Gastronomiques Instruction sheet). I use a jar with 1€ coins, 10cents coins and 5cents and updated all the references (diameter, labels, etc…). I’ve labeled the restaurant chains after the French hero celebrated on each type of Euro coin. As a final suggestion, I found that, in this context, the game works perfectly with small groups (3-4 students).” The only thing I might add to this is that you may want to use coins from different countries to capture how country risk may increase the risk of the winners’ curse (e.g., it introduces more error/uncertainty into the valuations). Often students have been introduced to the concept of the winners curse. The point here is to emphasize that the strategic aspects of M&A (country risk, diversified targets, synergies, etc.) increase the risk by injecting uncertainty into valuations.

Contributed by Elisa Operti