We’ve updated “Perfecting the Art of the Deal,” a working paper that applies our research to potential mergers and acquisitions. Read the introduction below and click to download the entire article in PDF form.

The recent attacks on the Bank of America board, related to the ill-fated decision to buy Merrill Lynch, underscore the need for boards to change the dialogue with management.

A New York Times piece on BofA focuses, as many articles do, on the clubby nature of many boardrooms–you serve on my board, I serve on yours, and we make nice with each other. But the issue is broader than that. Even if you have a truly independent board with lots of diverse viewpoints, the CEO will still carry the day almost every time. He has all the information and controls how it’s presented to the board. He makes the decisions, while the board pretty much is limited to deciding whether he gets to continue in the job or whether he should be replaced–a call that boards seldom make unless the situation is dire.

There’s something important that is getting overlooked in all the coverage of the stunning news that Bank of America has had to line up $20 billion in assistance from the federal government to handle problems at Merrill Lynch, just days after closing the Merrill purchase.

That something is this: The problems are just beginning.

When Bank of America announced its deal to acquire Merrill Lynch in mid-September, we noted in this space that we were skeptical. Based on the research for our book, we thought Bank of America was making a classic mistake: focusing so much on the benefits of an acquisition that it glossed over the potential problems. Merrill seemed to be fraught with potential problems–and they are now coming into painfully clear focus

Bank of America’s hasty decision to buy troubled Merrill Lynch for roughly $40 billion gives us pause because it seems to rhyme with Conseco’s disastrous purchase of Green Tree Financial in the late 1990s. The Green Tree acquisition proved to be so toxic that Conseco soon took billions of dollars in writeoffs, then filed for bankruptcy protection. It was the third largest bankruptcy in US history up to that time.