Evaluating Potential Mergers

(MoneyWatch)  A merger may seem like the quick and easy way to grow your company. But the process is complex and fraught with risk: More than 50 percent of mergers fail. Why? Because they're the corporate equivalent of an impulse purchase: Executives fall in love with the promise of a new acquisition without asking themselves if it's really a good fit. In Part One of our three-part series on mergers and acquisitions, we examine the fine art of evaluating a merger before you make an offer. (See Part Two for how to negotiate a merger and our follow-up Crash Course for tips on merger integration.)

If you're considering acquiring another company, get started with our crash course on how to plan a successful merger. Then take a look at some famous failed M&As and what they have to teach you in lessons from the mega-mergers. Be sure to ask yourself if your potential deal exhibits any of the five warning signs of a merger disaster in the making. Then, when you're ready to seriously consider a merger candidate, use our M&A quick analysis worksheet to decide if it's the right deal for you.

Update: In our feature video, business consultant Richard Caro walks you through the critical steps to take before you select a target company.