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If you’re a midsized business leader thinking about a possible merger or acquisition, you may need to stand in line. Bolstered by a strong economy and pent-up cash, companies are doing deals at the greatest pace in nearly six years.

But with a well-documented failure rate of 50 to 80 percent for business newlyweds, experts advise all merger parties to properly assess whether a relationship will stand the test of time.

"Over the years, studies show that mergers have resulted in more value destruction than creation," says Margarethe Wiersema, professor of strategy at the Merage School of Business at the University of California-Irvine. "But mergers continue because people want to be the ones to beat the average. That’s why you really need to go at it in a strategic way."

In its 2006 report for midsized companies, Corporate Board Member magazine forecast that merger-and-acquisition (M & A) activity would continue to increase, despite concerns about rising interest rates and energy prices. While M & A volume was relatively consistent in 2004 and 2005, the actual dollar value of transactions rose significantly in 2005 — an indicator that companies are getting more comfortable with larger deals. In addition to noting increases in private-equity activity, which drove about 15 percent of those transactions, the report indicated a sharp uptick in funding available from "alternative-asset" sources such as hedge funds and venture-capital firms.

Still, available capital and good intentions won’t remedy poor planning. The most successful mergers or acquisitions occur when business leaders can clearly define why the combination will improve a company’s short- and long-term prospects for growth. Most often, those decisions fall into three broad categories,including:

M & A for economic benefits. Experts say this is one of the most frequent reasons companies choose to come together. The strategy tends to work best when industries undergo rapid consolidation, when brand loyalty gives way to commoditization, or when a merger dramatically improves cost efficiencies and scale,particularly in marketing and distribution. In recent years, this approach drove a high level of M & A activity in banking and financial services, largely due to the economic advantages of assembling a larger branch network or bundling a wide range of finance,trust and investment services under one corporate umbrella.

Sometimes,however, the perception of economic benefit does not match reality. For example, Wiersema points to Newell Corporation’s $5.8 billion acquisition of Rubbermaid in 1999. Newell paid 10 times more for Rubbermaid than it had for any other business, but it never fully realized the expected economic windfall of becoming a consumer-products powerhouse. As a result, shares in Newell Corp. lost half their value in two years. Today, despite major restructuring, the combined company’s market value is approximately 60 percent of what the two firms were worth before the deal.

M & A for product or brand extension benefits. This M & A approach is often a good strategy for firms that believe they can grow by broadening their product or service portfolios. A solid example of a midsized company that pursued a disciplined approach to this strategy was Fisher Scientific, which spent nearly two decades building itself into one of the world’s leading wholesale distributors of laboratory equipment and instruments. To get there, Wiersema says,the company made a series of acquisitions that allowed it to extend the Fisher brand into areas such as health-care supplies, pharmaceutical packaging, life sciences and drug-discovery tools. The payoff? Fisher itself was acquired earlier this year by Thermo Electron for $11 billion.

"This was a great example of a firm that stayed true to its core business but gained synergy by adding other firms that offered products that complemented or extended that business," Wiersema says.

M & A to anticipate change or ensure survival. This approach involves a frank evaluation of whether a company’s core skills or products will provide greater or lesser value in the years ahead. If a firm determines it does not have the internal resources to make needed changes, a well-designed merger or acquisition can go a long way toward ensuring long-term viability.

One of the most striking examples of where this approach makes sense is in the fast-changing movie-rental business. As Internet and broadband cable technology continues to gain consumer market share, many industry watchers agree that the growth of on-demand movie services will eventually outpace walk-in rentals. That, in turn, will force even name players to adapt or eventually die.

"In this type of situation, look at a company like Blockbuster Video. It has strong name recognition that it could bring to the party — either as an acquirer or as a target to be acquired," Wiersema says.

If your company has defined its strategy and is looking to be on the buy side of an M & A transaction, experts suggest the following tips:

Seek high-quality acquisition targets.While a cursory glance at the market may reveal several potential candidates, don’t skimp on due diligence. Wiersema, who teaches M &A strategy to executives in southern California, says strategic buyers should look for firms with solid balance sheets, strong market growth and stable management teams.

Be prepared to pay. After several lean years in the M & A arena, buyers have returned in a big way. That means top-quality acquisition targets now command attractive valuations. The 2006 Corporate Board Member M &A forecast predicts that pricing for most transactions between midsizedfirms would fall between six and eight times EBITDA (earnings before insurance, taxes, depreciation and amortization) — though that figure can vary substantially from one industry to the next.

Be prepared to execute. Determining your strategy, identifying a high-quality target company and closing the deal isn’t the end of the road. Many transactions that make sense on paper fail in execution, largely when management teams cannot successfully align corporate cultures, achieve cost reduction and revenue targets, or integrate key technical or financial systems. "To succeed, you really do need to think through what the firms can do when they are put together," Wiersema says. "Execution is key, and if the potential you paid to acquire can’t be extracted, you won’t be able to deliver."

By following these steps, you can design an M &A approach that will help your company grow while staying true to itscore business strategies.