The Business2.0 blog (hat tip: Damon Darlin) found a very insightful article from McKinsey about how dicey the M&A arena is.  Amazingly over 70% of mergers fail to achieve good results.  It is interesting that such a survey would be undertaken now, particularly considering the current consolidation that is happening in the carrier world.

The reality is that very few companies have been successful in the merger game.  So what seems to work?  GE's rapid integration model, which was adopted by companies such as Cisco seems to yield above typically good results (sure there are odd exceptions, such as PixStream, but for the most part, Cisco has been able to keep a pretty good record in that front). 

Managing people related issues effectively is sine-qua-non.  Some companies (e.g. GE, Cisco, Lucent, AT&T) apply their own methodologies to analyze issues in pending deals.  GE has an online guide for managers that incorporates anecdotal evidence from past deals, a database of key GE personnel having merger experience and tips for creating some integration teams. 

In fact M&As can be so tricky that there are management consultancy firms that exclusively specialize on helping firms achieve success.  One of them is Integra100, which offers a comprehensive set of services ranging from merger evaluation to culture integration.

Given the dismal success rate of mergers, it is only natural that savvy VC gurus such as Fred Wilson and Ed Sim agree that when one of their company's competitors is acquired, they stand up and cheer.  The reasons?  Cultural clashes, leadership that is looking to cash in the chips and re-invest the money in a new venture, exodus of the best employees and customer base erosion.  I have experienced this at Nortel (culture clash: Periphonics, all others combined in one: Clarify).

So perhaps for mergers, the Japanese "Art of War" method would get the nod - namely, learn from other companies' mistakes, follow successful practices and improve on these practices, even seeking expert third party help.  These measures might not always yield to M&A triumph, but they will surely increase the chances of a successful M&A above and beyond the 30% level.