The failure rate for mergers and acquisitions, or M&As, is anywhere from 40 percent to 80 percent. That means that most deals fail to achieve the strategic aims for which they were initiated. They make money only for the lawyers who conclude them.

The major reasons for failure are simple:

  • Deal fever. Momentum, personal ambition, and public headlines make it difficult to stop a deal once it gets going. Politics and ego make it hard to assess the objective merits of a negotiation once it has started. This applies to boards, too.
  • Implementation. Those doing the deals rarely implement them. Lawyers send in their invoices, and the strategists move on.
  • Lack of insight. Nobody tells the truth, and few companies examine where or how the deal makes sense.

So what are the characteristics of successful mergers? Here are a few rules of thumb that won't guarantee a successful outcome but do make it more likely.

Take it slowly.

Lopezgarcia Group in Texas grew out of two structural engineering firms run by Wendy Lopez and Rudy Garcia. But the deal that brought them together wasn't quick. When it was first broached, the two leaders explored options but backed away. Nearly a year passed before they revisited the opportunity and concluded the deal. That it wasn't all over in a flash is one reason it worked and both principals were happy with it. They'd had time to get to know one another and determine what each needed from the combined firm. Several years later, the combined firm was sold to URS.

Most business leaders talk about M&A like a marriage. Few people think it's a good idea to get hitched after just one or two dates. Get to know one another, be fearless in your exploration of opportunities and threats--and don't feel committed too early. Keep lawyers at bay.

Make integration the priority.

The reason that lawyers loom so large in mergers is because the deals are legally complex. But the lawyers' interests and yours are misaligned. You don't need the deal to close; you need it to work. So bring the people charged with making the deal work to the table. As soon as you can, get them to map out how the integration will happen and to identify the key people and the key issues that will guarantee its success. Lock them into the deal.

Visualize, plan, and schedule the first 100 days in which integration will happen, and then reality-test it. What will go wrong? What will you wish you had done--that you could do right now? Bring in every devil's advocate you know. Never think of integration as something that happens after the deal; it is the deal.

Mesh cultures.

If anyone tells you that your culture and the target's culture are the same, he or she is lying. No two companies have the same culture, and it's far more important to understand the differences than the similarities. Don't ignore the differences. Surface them and get the tension out, where you can deal with it. A cultural mismatch is one of the biggest reasons these deals fail--but they don't have to.

When Carol Vallone bought WebCT, her venture-backed U.S. company was acquiring a Canadian nonprofit. The cultures were oppositional, and the geographies (Boston and Vancouver) didn't help. So Vallone highlighted it, scheduling hockey games between the two sites. What could have derailed the two businesses was used instead to fuse them with humor.

On balance, I'm something of an M&A hawk. The deals work so rarely, and they are so distracting, that my default position is to avoid them. But there are times when combining companies gives you access to customers, markets, and innovation more efficiently than would organic growth. It is a lot like marriage: It mostly doesn't work, but when it does, it's glorious!