This article originally appeared on The Edge Markets.

The open secret about mergers and acquisitions (M&As) is that most deals fail to generate the synergies companies expect when they announce a merger. In a Bain & Company survey of 352 global executives, overestimating synergies was the second most common reason for disappointing deal outcomes.

One of the causes of this overestimation is well known: companies set aggressive targets to justify a deal price to financers. But Bain analysis comparing deal announcements with the performance of more than 22,000 companies has unveiled another, even more fundamental contributor to the rampant overestimation. Most merging companies entering a deal don’t have a clear understanding of the level of synergies they can expect through increased scale.

Instead, they typically make broad estimates based on prior deal announcements, without considering whether the cost structure of the combined entity is realistic based on benchmarks of like-sized companies. For example, if two US$100 million companies merge, they rarely know what the resulting cost structure will look like based on their industry’s existing US$200 million companies. We found that across most industries we analysed, on average 70% of companies announced higher synergy estimates than would be expected just by companies getting bigger.

But the best companies justify higher targets and provide a roadmap for achieving them. They use the disruption caused by M&As to pursue broader changes like adopting zero-based budgeting initiatives and incorporate new ways of working that help them surpass rivals to become cost leaders.

That approach requires merging companies to be far more disciplined about calculating expected synergies. It also requires them to use industry benchmark data to get a firm grasp on how each company’s costs stack up prior to the transaction and to understand how much can be gained from scale alone, as well as from the additional effects of improving costs.

Read the full article at The Edge Markets.

Laura Miles is a partner with global management consulting firm Bain & Company in Atlanta; Adam Borchert (Boston); Alexandra Egan Ramanathan (Chicago) and Suvir Varma (Singapore).