Our research has repeatedly confirmed that companies that regularly engage in dealmaking create superior returns, while less-experienced companies tend to destroy value. (See Exhibit 1.)

Master the art of timing. In M&A, as in many other areas of business, timing is half the battle. Arriving late, whether in the broader M&A or business cycle or in a specific deal situation, typically results in diminished post-deal value creation or a missed opportunity altogether.

Our research indicates that dealmakers achieve the highest returns early in the cycle, often within the first two years. Interestingly, downturns have consistently proved to be prime periods for deal hunting. (See Exhibit 2.) Nevertheless, optimal timing can fluctuate depending on sector, region, and economic situation, as well as on company-specific factors.

Go outside your comfort zone, but not too far. Ever since conglomerates went out of fashion, the consensus in the Western business world has been that the best approach is to focus on the core business—not least from a shareholder perspective. In the M&A context, however, the situation is more nuanced. Our research shows that deals involving a company’s core products or regions do not create the most value. Rather, transactions in which dealmakers go outside their comfort zone yield higher returns over the long term.

This may sound counterintuitive, but a closer look clarifies the picture. Yes, go beyond your comfort zone, but do not stray too far: cross-border deals, for example, are most successful if they remain in a company’s core region. This is understandable, given the challenges posed by unfamiliar regions and cultures. Similarly, deals focused on adjacent products and services that lie relatively close to a company’s core offerings yield more value than those that aim for broad diversification. At the other extreme, although pure rollups and scale expansions can be beneficial, they are unlikely to drive long-term outperformance. The keys to staying ahead of the pack are innovation and a degree of continuous reinvention. Rigorously sticking to one's core may be effective for a while, but eventually a broader strategy will be necessary.

Focus on synergies—they justify the deal. The importance of emphasizing synergies might seem obvious, since synergies are at the core of value creation in corporate M&A. By making acquisitions feasible when a target is not sufficiently attractive by itself, synergies allow corporate buyers to edge out financial sponsors in tight bidding situations.

Merely identifying potential synergies is a far cry from realizing them, however, and their value diminishes if the buyer simply passes them on to the seller via a higher purchase price. Our research reveals that, over the past 15 years, buyers in public M&A deals have retained only about 50% of synergies; the rest tends to be factored into the purchase price, although this rate fluctuates with market conditions. (See Exhibit 3.) Our studies repeatedly indicate that insufficient or unrealized synergies are among the main reasons why some deals are deemed failures.

After identifying undervalued targets, rely solely on cash for transactions. (See Exhibit 4.) A cash-only approach ensures discipline, particularly in valuations—a crucial element in times of limited and more expensive capital. Conversely, stock-for-stock mergers tend to underperform, resulting in subdued investor expectations as reflected in lower announcement returns.

Think outside the box. Traditionally, the default tool for dealmakers has been the plain-vanilla 100% acquisition, on both the buying side and the selling side. For instance, over the past two decades, majority deals outnumbered minority ones by about 3 to 1, although the annual ratio has evolved from 4 to 1 two decades ago to 2 to 1 more recently, largely owing to the rise in VC financing. The attraction of majority deals is clear: they are relatively simple to value and negotiate, and they are amenable to straightforward governance after closing. But in today's ever-more-complex M&A and business landscape, this approach is not always optimal.

We have observed a consistent rise in alternative deal types, such as minority shareholdings, joint ventures, strategic partnerships, and corporate venturing. These structures may be more complex to execute and manage after closing, but they open new strategic options by giving dealmakers much-needed flexibility to customize capital allocation in response to specific conditions. Given the shift from the past decade's abundant capital to the current scarcity, these alternative approaches have become an indispensable part of an experienced dealmaker’s toolbox.

Embrace transparency. Within the typically guarded world of M&A, some executives may not view open communication as a top priority. However, our research suggests that strategic communication at specific stages of the M&A process can bolster value creation. First, investors should not be surprised by potential acquisitions. Putting them on notice requires having an M&A strategy that is clear and well-communicated without limiting management’s strategic flexibility. Second, once a deal is signed, communicating credible and sufficiently detailed plans for synergy and integration (including material ESG efforts) gives investors a baseline for measuring deal success and instills confidence in management’s ability to deliver. Third, internal communication is equally vital. Effective dialogue within the organization facilitates the integration of new acquisitions by setting a unified vision and purpose from the outset. Overlooking internal communication creates the risk of losing top talent during integration or carve-out efforts.

Double down on integration design and execution. The importance of execution to successful deal outcomes cannot be overstated. One of our most extensive studies on deal success factors reveals that 30% to 40% of deals fail as a result of, among other factors, poor planning or a lack of strategic fit. In almost half of the failed deals, inadequate or misguided post-merger integration was either among the root causes or the primary cause of the disappointing value creation.

It is essential to remember that closing a deal is only the beginning of the journey, not its culmination. The true challenge of value creation lies ahead, and missteps can negate the hard work and thoughtful preparation that preceded the closing. Following BCG's 12 imperatives for integration success, based on over two decades of hands-on experience, can help companies avoid pitfalls.

M&A is one of the most complex and risky endeavors a management team can undertake, and larger deals only raise the stakes. The pitfalls are numerous, ranging from overlooking a critical risk during due diligence to underestimating the challenges of post-merger integration. And, of course, ever-present economic and market uncertainties loom large over any significant investment. By adhering to our ten lessons, dealmakers can increase their likelihood of success—especially if they pair these imperatives with a competent team, commitment, hard work, and a willingness to take risks. Simply put, fortune favors those who are not only bold but also well prepared.

The authors are grateful to Paderborn University, where Professor Sönke Sievers holds the Chair of International Accounting, and Daniel Kim and Yiran Wang of BCG’s Transaction Center for their valuable insights and support in the preparation of this article.