Making a merger work is an acid test for any executive team. Study after study has shown that up to 80 percent of M&A deals completed during the 1990s failed to justify the equity that funded them.¹

Research from a recent McKinsey study suggests that a key problem is the tendency for integrating companies to pay too little attention to revenue growth and to focus almost exclusively on cost synergies. As one integration manager put it, "the CEO told me to put a knife between my teeth, dive down, slash deep, and not come up until it was done."

And while growth may be a stated objective in three out of four mergers,² a study of 193 transactions between 1990 and 1997 worth at least $100 million found that only 36 percent even maintained revenue growth through the first quarter after announcement.³ By the third quarter, 89 percent had succumbed to a slowdown, with a median revenue decline of 12 percent. Underperformance of target companies with a history of growth rates lower than their industry peers explained only half the post announcement result. Unsettled customers and declining staff productivity explained the rest.

In the end, flat or...