As mergers and acquisitions heat up--we're already seeing this in a huge way with the NYSE Euronext-Deutsche Bourse deal--boards will have to tune back in to the risks that merger activity represents. These risks had been on the back burner, but no longer.

For a reminder, we need look no farther than Dynegy. A significant transaction like the botched Dynegy sale, "brings focus onto the company. And this focus may include new hedge funds that are much more willing to take risks and challenge management. These risks are heightened when the deal is a defensive one, because there is more to criticize," notes the New York Times.

At Dynegy, a series of botched efforts to find a buyer--first the Blackstone Group and then Carl Icahn--left shareholders angry and perhaps in a punitive mood. Dynegy's CEO and CFO resigned under a cloud, and the entire board has announced it will not stand for re-election.

This is exactly how you do not want to manage a merger. If you do get a deal, the risks escalate, in terms of the combination of assets risk, talent risk, IT integration risk, credit rating change risk and so on. There's a lot for directors to contend with.

The time to start looking into handling M&A risk is now, even if a deal is not on the table just yet. 

For more:
- here's the article on Dynegy
- here's an article on M&A risk from Bloomberg

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