Nobody could accuse global management consultancy A.T. Kearney of wild-eyed romanticism in its view of corporate marriages. Earlier this year the firm published an analysis of seven types of mergers and reported that they all delivered uninspiring results on a range of metrics, including change in return on sales, sales growth, EBIT growth, and shareholder value, as we reported here. [1]

A new A.T. Kearney report takes a characteristically level-headed starting point, noting that studies repeatedly show that half of all M&A deals fail -- and the percentage of duds may be even higher, given the fact that researchers rarely control for factors such as a booming business cycle -- but nevertheless attempts to tease out the factors underlying successful integrations. The report is based on interviews with more than 30 executives from Europe, the United States, and Australia who have worked on significant deals within the past two to four years.

Cost synergies have been a traditional focus for M&A efforts, the study notes, but managers are increasingly focusing on top-line growth. When participants were asked their reasons for merging, they identified growth-related objectives such as expanding geographically, enlarging the business portfolio, and acquiring new customers, products, and technologies almost three times as often as cost savings.

Success boils down to two crucial factors: leadership and execution. When participants were asked to identify the critical ingredients for success, the top responses were strong leadership and direction; new organization and management; and three factors related to execution (professional integration management, integration approach and speed, and communication). Looked at another way, execution factors account for 57 percent of an integration's success, and leadership factors for one-third, according to A.T. Kearney's analysis.

Interestingly, attention to cultural factors ranked way down the list; the report speculates that "dealing with cultural differences, even in mergers, has become somewhat routine and is simply part of daily business life in today's globalized economy."

One important corollary of the leadership finding is that companies should make decisions about manager placements immediately after the transaction to minimize uncertainty. Otherwise, key employees might walk, taking a large slice of the companies' intellectual capital with them and potentially dooming the deal to failure. A.T. Kearney also recommends making some "symbolic" appointments early in the process -- for example, placing execs from the acquired company into senior positions.

On the execution side, tight management trumps the use of best-practices tools and standardized approaches by a 3-to-1 margin. The relatively new practice of tying integration success to compensation through MBOs (management by objectives) also received high marks from participants. While completing the integration as soon as possible is an approach favored by 36 percent of interviewees, most organizations are taking a more nuanced approach, for example by adapting the speed of the integration to specific tasks and value issues. And in some cases they're choosing to integrate only selected parts of the companies, or even to skip integration process entirely.

The A.T. Kearney study, "Three Years After the Marriage," is available here [2].