Optimal Bidding Strategies in M&A: an Experimantal Approach

Why Most M&A Deals Fail And What I Found About When to Bid and When to Walk Away

More than two thirds of mergers fail to create value for the acquiring firm. That statistic has been repeated for decades, and yet deal activity keeps rising. The problem is not a lack of models or data. It is a lack of understanding about timing, competition, and how confidence can quietly turn into overconfidence.

In my dissertation, Strategic Bidding in Mergers and Acquisitions: An Experimental Approach, I wanted to unpack that failure. I started with a simple question: if most deals go wrong, can we model what “right” even looks like?

To do that, I built a game theoretic framework inspired by Robert Axelrod’s experimental research on cooperation. I adapted his tournament approach into a Monte Carlo style simulation for M&A, where two acquirers, one with high synergies and one with lower, compete across different market conditions. Each bidder can either overpay, play it safe, or bid exactly what the target is worth.

The results were striking. In calm early markets, firms that bid boldly tend to win. In mid cycle markets, precision and discipline create the most value. But in overheated late stage markets, the smartest move is often to hold back.

What this shows is that there is no single formula for success. The right bidding strategy changes with the phase of the merger wave. Timing matters as much as valuation.

If you work in strategy, banking, or corporate development, understanding that shift could make the difference between a deal that compounds value and one that erodes it.

I have attached the article to this page, and I definitely think it is worth a read.

Dissertation final draft.pdf

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