Numerous studies have shown that roughly two out of three corporate acquisitions fail, as measured by the performance of the stock of the acquiring company. What if those odds could be flipped? What if it were possible to succeed two times out of three and just fail a third of the time?

Our research suggests this is possible. A 20-person team that spent two years investigating 2,500 major corporate failures from the past 25 years found that almost half stemmed from ill-conceived strategies that should never have been pursued. Applying the lessons derived from that research can help executives dodge problems and reshape strategies in ways that greatly increase the chances of success.

The issue is timely because there’s likely to be an awful lot of acquiring over the next few years. That’s because the sort of lull in activity that currently exists has historically been followed by a burst of M&A activity. The severity of the recession may, in fact, mean deal activity will be far greater this time around. The crisis is creating scads of targets, many of which never would have been in play before. And many companies that are available for purchase are especially attractive because they haven’t had time to really deteriorate; they just need a shot of liquidity, and they’ll be good to go again.

But the possible downside is enormous, too. Just ask Bank of America about its $50 billion acquisition of Merrill Lynch. Or ask private-equity fund Bay Harbour Management about its decision to buy the Steve & Barry’s retail clothing chain out of bankruptcy proceedings for $168 million last year, only to announce three months later that it would liquidate the chain. Based on our research, we identified both those deals as flawed at the time they were announced, but it was too late for BofA and for Bay Harbour. (For more on our thoughts on these and other deals, see our blog at blog.billiondollarlessons.com)

The time to get things right is now, not when the deal pipeline starts to fill. That’s because our research found that, once a deal is in the works, it’s hard to stop, even when it’s a bad idea. Companies need to agree ahead of time on the sorts of quality checks and process safeguards that will let them strengthen weak ideas and stop bad ones. In other words, executives can take advantage of the current lull to make sure that, when the deals start flowing again, they can have those two in three odds, not the one in three that have historically prevailed.

In this paper, we’ll lay out a quality assurance process that we call the Strategic Stress Test. Companies should be putting this process in place now, because good deals will make heroes of the acquiring companies and their senior executives while bad deals will sink others.

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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.

Whatever the makeup of the board, directors need to find a way to have a true dialog with the CEO. That means conversing broadly before the CEO has committed so fully to a strategy that a reversal would cause too much loss of face. That means getting information in less digested form, hearing the reasons not to pursue a strategy as well as the factors working in its favor.

In short, that means some sort of a devil’s advocate review, so that boards understand all the assumptions that go into a strategy and can evaluate all the ways things might go wrong. We describe such reviews in great detail elsewhere on this site, so we won’t repeat the information here. But we’ll note that a colleague who is on the Intel board says it uses a devil’s advocate-like process to hold robust conversations with top management, and it’s hard to argue with Intel’s results.

We’ve written an article about the dialog with top management for Directors and Boards magazine, and we’ll post the article as soon as it becomes available. The magazine is going to press this week, so that should be soon.

That something is this: The problems are just beginning.

The losses on mortgage-backed securities, which BofA now realizes could top $100 billion, are just one of the reasons that we wrote in September that we didn’t like the Merrill deal. The losses may actually be relatively easy to take care of, because the federal government is desperate enough to shore up the U.S. financial system that it will help BofA with the mortgage-related losses. But the government won’t help when BofA has to sort out the clashes between the white-shoe Merrill brokers and BofA’s more middle-class culture–and various newspaper reports say those clashes are already well under way. The government also can’t be expected to help BofA when it turns out that becoming a financial supermarket–with retail brokerage, investment banking and trading operations, on top of BofA’s retail banking–isn’t a viable strategy. Citigroup just spent a decade trying that strategy and is now reversing it, causing great pain all around. Why should BofA’s supermarket work any better?

Stay tuned. More bad news is coming.

For example, a recent Wall Street Journal article points out that Bank of America’s offer was for 1.8 times Merrill’s tangible book value, a commonly used measure of net worth that strips out intangible assets such as goodwill. Yet Goldman Sachs now trades around just 0.8 times tangible book value, and Morgan Stanley trades at around 0.4 times tangible book value, even though both are healthier than Merrill Lynch. As the Journal notes,  “It looks like BofA overpaid.”

The same Wall Street Journal article notes that Merrill could face even more problems because of its investments in toxic mortgage-related assets. Merrill retains mortgage-related assets equivalent to 207% of tangible equity, versus 88% for Morgan Stanley and 55% for Goldman. It had seemed for a while that the $700 billion bailout would reduce the fallout for Merrill from its $64 billion of so-called Level III assets, which are mortgage-related and other assets so tainted that they could not be priced because no one would bid for them.  But the risk now reasserts itself given that the Treasury department is no longer going to buy such assets.

Trouble also appears to be brewing with the integration of Merrill’s coveted brokerage business into BofA.  Another WSJ article reports that there is a culture clash developing between the BofA and Merrill brokerage folks. The Merrill side thinks the BofA folks are rubes who wear cheap clothes and have flag pins in their lapels. The article suggests that the good Merrill brokers may jump ship.

Again, this sort of culture clash is a classic problem and could have been anticipated. But BofA chose to gloss over the issue in its heated pursuit of Merrill. So BofA may pay a heavy price.

While it’s obviously too early to know just how the Merrill purchase will play out, Bank of America may be making one of the classic mistakes that can occur in a consolidating industry. B of A may be focusing so much on the positive attributes of Merrill, which B of A has long coveted, that it may be glossing over the problems. B of A loves the idea of increasing its size and adding Merrill’s huge retail brokerage operation and investment banking unit. Meanwhile, Merrill’s investment portfolio, which includes heavy doses of mortgage-related securities whose value has declined by $45 billion, may well continue to spiral downward.

B of A may also be overpaying. There’s little doubt that Merrill would have cost B of A far less a week from now than it did when the deal was negotiated over the weekend.

In addition, B of A may be making a common mistake associated with synergy strategies. The company seems to assume that there will be benefits from combining different types of financial services—that B of A’s banking operations will somehow benefit from, and benefit, Merrill’s brokerage and investment banking units. But that financial supermarket strategy has been widely discredited. Citigroup, the biggest proponent of supermarket-like synergies, is now under pressure to spin off some operations to streamline its structure.

There likely also will be a hangover from the mistakes Merrill made when it embarked on an adjacency strategy. Merrill seems to have had a bad case of Goldman Sachs envy or hedge-fund envy, watching how Goldman and the funds earned billions of dollars by investing in high-risk securities. Merrill looked at its thousands of brokers and its huge investment-banking operations and decided it had the expertise to move into the market for managing risk. But Merrill overestimated its strengths and underestimated the complexities of the new market. It turns out that managing risk is a highly specialized endeavor, requiring a certain type of person, a particular structure and seasoning that comes only after years of institutional experience with the market. Merrill was totally unprepared—and B of A has no more experience with managing risk than Merrill did.

Now, the tone in the market may turn to the positive, if regulators manage to bolster AIG and Washington Mutual. B of A may turn out to have engineered a bargain by acting decisively in the middle of a crisis. In addition, B of A has extensive experience with acquiring other businesses and integrating them into B of A’s core business, experience that mitigates some of the risk that normally comes with a big purchase.

But B of A has already tried once to call the bottom in the subprime mess, when it bought Countrywide Financial two months ago for $4 billion. As of the moment, that purchase looks rash—and it had a better strategic rationale than the Merrill takeover, given that Countrywide fit nicely with B of A’s existing mortgage operations. We’re afraid that the Merrill purchase may turn out worse.