When we remodeled our homes some years back, we decided that the most expensive words known to man were, “While we’re at it. . . .” In doing the research for our book, though, we realized that the words, “Well, we have to do something,” have caused far more damage.

Executives convince themselves that, no matter what, they have to achieve some stock-price goal, some market-share goal, some profit goal. So, they lay out a strategy that might work and roll the dice, even when the odds are stacked against them. In other words, they take what they think is their best bet even though an objective review would show they aren’t making a good bet. Often, they lose.

Sometimes, they lose billions—making us feel a bit better about those bad thousand-dollar decisions we made while remodeling.

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.

Let’s say a pharmaceutical company is conducting clinical trials on a drug. Two trials find major problems. Several similar tests by others end in failure, too. Would the company get the drug approved? Of course not. Yet Pfizer is trying to drum up enthusiasm for its plan to buy Wyeth for $68 billion, even though its two other major acquisitions since 2000 have flopped and even though the track record for big M&A deals in the pharmaceutical industry is spotty at best.

In the process, Pfizer is raising numerous of the red flags that, according to our research, can mean a strategy is in peril. Pfizer seems to be seeing synergies that aren’t there; is underestimating the complexity that can come with additional size; may be paying too much; isn’t learning from prior mistakes; isn’t considering all its options; and is acting more because of problems in its core business than because of opportunities in a new one.