“There have certainly been examples of some high-profile failures over the years,” says Will Hill, who is managing director of the investment banking practice at FMI, a firm based in Raleigh, N.C. “Certainly the Washington Group’s acquisition of Raytheon in the last decade was one example of how you can do an acquisition that can sink the ship – and it did. It basically ended up bankrupting Washington Group.” Though the company later emerged from bankruptcy and eventually sold itself to URS, the failed Raytheon deal humbled its prior ambitions.

Mergers and acquisitions inspired by attempts to ride out bad economic times are common in the construction market, says David Pfeffer, a partner for Tarter Krinsky & Drogin, a law firm in New York. But such mergers come “at great risk” if the plan is simply to merge operations and slash expenses through layoffs and cost-cutting without applying a broader strategic vision, he says.

“Cost cutting is very tempting and can work, but if you don’t have revenues coming in, it won’t save the company,” Pfeffer adds.

Trying to save a troubled company in a merger usually only works if the other party is healthy, says Ronald Eagar, partner at Grassi & Co., an accounting firm. “If you have two ailing companies, you’re obviously bringing two sets of problems together,” he says. “If you have one ailing company and one healthy company, you would want to see some specialty or client base that the [troubled firm] can contribute.”

Eagar says a typical mistake is not having a post-merger roadmap or having a plan but failing to execute on it. “Each side may have their own perception of what the merger means,” he adds. “You need to give guidance at the management team level.”

Another stumbling point is lapses in communication, whether it is informing outside vendors, suppliers, and subcontractors about what is changing at the merged firms, or fully disseminating information internally about steps in the integration process, Eagar says. “When people don’t know what’s happening, that’s when you start rumors, that’s when you have problems.”

The bright spot for contractors is that they actually should know how to approach a merger wisely if they stay disciplined and apply the risk management tools they already should have in place to manage projects.

“Contractors incur a huge amount of risk day in and day out in what they do,” Hill says. “This is just one of the most risky businesses there is, and the profit margins are always thin. To be a good contractor and have the capability of doing an acquisition – in both cases you’ve got to be a good risk manager.”