Buying companies? Sounds glamorous. Is hard.

Why do most acquisitions fail? Learn from my mistakes..

Chevron is buying Hess. I wonder if the teams feel elated or exhausted. Acquisitions can be a real high of business life or suck the lifeblood out of you. In fact, most fail. McKinsey data shows 70% don’t achieve the benefits modeled out at the start.

At lastminute.com, we did more than 15 acquisitions in the few years after we took the company public. I think it's not too disloyal to admit that some of them were not all that successful. We used them to scale fast, to find amazing talent and to enter international markets. But they also came with a complicated maze of challenges, many of which were unexpected. Acquisitions are rarely as straightforward as they appear. 

So what kind of things go wrong? Often, you are not just buying assets and a customer base, but also the spirit, vision, and passion of the entrepreneurs who started the business. On a good day, entrepreneurs can have drive, an ability to see opportunities where others don't, and a willingness to take risks. But on a bad day, this can  be a double-edged sword. They can be fiercely independent and unused to being in a larger structure. I have seen big egos with differing views clash about vision, and direction, making the post-acquisition time even more challenging than it already is.

Recognising the special ways founders work and being realistic about how long they are likely to remain motivated without as much control as they had before, is important. Aligning incentives and talking in detail about their ambitions before signing on the dotted line is vital.

When lastminute.com acquired Degriftour, France's premiere package holiday company, we definitely underestimated the the cultural divisions between a UK newbie and an established big hitter in another country. Not only had two “rosbif” upstarts (Brent Hoberman and I) bought this revered French brand but we did not always bridge the differences as effectively as we could. 

While financial due diligence was always top of mind, the equally important cultural due diligence got somewhat neglected. If you do not flesh out ‘how you will work’ as much as ‘what work you will do?’, then you might slow down, not speed up your growth. When I think back, we should have invested more time in understanding the company's culture, both what made it special and what was holding it back. We could have made more specific plans about how we would merge our styles. This might have alleviated some areas of misalignment. 

Beware also of more junior employee’s getting fed up with the inevitable uncertainty that comes with takeoversdeal changes. It is hard to quantify in advance but if widespread it will impact the target company's performance. The distraction of getting the deal done is a heightened moment, but post deal it sometimes ramps up further as people worry about their jobs. 

I was a non-exec, in a company that started a deal process and at first only a couple of senior managers were involved. This was right as otherwise it would have caused massive uncertainty, but things leaked and suddenly everyone was second guessing the  process and the daily work of the business slowed down.

 Ideally you only want free flowing information at the time of the deal’s close when you can prioritise keeping employees from both companies updated. Then it's important to be transparent about the acquisition's goals and how it will affect people. Create multiple opportunities for employees to provide input and voice concerns. This is true of  your suppliers and your large customers too - be proactive in letting them know what is happening so that long term relationships don’t falter. Transactions are more destabilising than you might expect.

Next on my list of pain? The horror of integrating technology platforms. In my experience getting this right is paramount to a successful acquisition. However, I have repeatedly witnessed companies underestimating the complexity of aligning disparate technology stacks. Where people have thought they were buying additive or innovative technology, they have ended up with inefficiencies, losing data, and disruptions to their operations. A tech company board I was on suffered from a higgledy-piggledy kaleidoscope of technologies from five acquisitions that were never brought together. This meant its launches of new software to the market became more and more difficult over time.

Think about conducting a comprehensive technology audit, perhaps with outside help as part of your overall due diligence. Identify areas of overlap and incompatibility. I would invest in serious project management capacity to oversee any technological transitions. Only then can you have clear budgets, outcomes, timelines and ownership. 

Integrating two companies really is a special business discipline. Accretive benefits don’t find themselves and merging cultures, systems and processes often involves tough decisions about redundancies and restructuring. Many companies underestimate the importance of careful planning and having senior team members who have integration experience. If you don’t have the bench strength you need, you will exacerbate post-acquisition chaos.

Reading this back, I sound a bit scarred don't I? Acquisitions can, of course, be a route to growth, but they can also be a route to headaches. Maybe that should give you pause for thought. It's always more distraction and work than you think. Chevron  probably has the resources to weather all of this, but you might not.