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by Caroline Clayfield
M&A activity is on the rise internationally and many major brands have been involved in recent activity. Managing the branding aspect of a merger or acquisition is never easy, but there are some vital steps that can be taken to maximise the chances of success.
Firstly, before a deal is even in the pipeline, dealmakers need to ask themselves several questions about the firm they are targeting. Shareholder value is among the most important issues to consider when acquiring, merging or divesting, and any deal should be examined from this perspective.
Different brands have varying market reach, organisational capabilities and cultures, and teaming up with or taking over a brand will either deliver synergies in these areas or prove incompatible in the long run. Dealmakers need to ask themselves whether a merger or acquisition will lead to synergies in terms of resources, market share and brand portfolios themselves.
Compatibility is a vital consideration as each brand has its own identity and values. If these values are too different from one another, a merger may not work. A takeover or merger between two very different brands, in terms of outlook, philosophy and culture, could fall flat and dealmakers need to think about whether the brands involved will benefit from the deal or drag each other down.
If brand managers give their 'thumbs -up' to a deal, the first post-merger consideration is the process of deciding which brand to keep or whether to form a joint brand. This is often a sticking point for many post-merger brand managers. One brand can belong to the larger of the two companies but still hold less strength than that of the smaller firm. In this case, it could be wise to take the smaller firm’s brand post-merger. On the other hand, it could be simply the case of taking the acquirer or market leader’s brand as the merger may have been a simple position-strengthening exercise.
The primary factor when deciding which of two brands to use after a merger is to consider which brand will provide customers with the most value. Figures detailing why merged firms fail indicate that it is a new business’s inability to maintain revenue growth that causes failure, thus maximising customer value is clearly of great importance.
Opting to rebrand a large part of a newly merged firm can, of course, be a more costly option than keeping brands separate, which is usually the sensible option when a merger takes place between brands operating in very different geographical locations. However, analysts at Type2Consulting claim that some costs are ‘good costs’ if they help to drive revenue and profit down the line.
Joint branding is often chosen as a strategy if those involved with the deal are keen to continue to promote the merger as a positive move for customers and the market in general. Joint brands like Daimler-Chrysler and AOL-Time Warner have sat happily with customers and these joint brands have now created personalities in their own right. What’s more, Type2Consulting’s research report, ‘The Value Implications of Corporate Branding and Mergers,’ found that branding strategies that ensure elements of both brands are included in the merged brand generate more positive investor responses both immediately after the merger and three years down the line.
In conclusion, the impact of M&A activity on brands should not be underestimated. Indeed, with customer retention being central to the success of a deal, branding needs to be a priority consideration when deciding which firms to target and which to leave well alone.
Branding strategies before, during and after a merger or acquisition
by Caroline Clayfield
M&A activity is on the rise internationally and many major brands have been involved in recent activity. Managing the branding aspect of a merger or acquisition is never easy, but there are some vital steps that can be taken to maximise the chances of success.
Firstly, before a deal is even in the pipeline, dealmakers need to ask themselves several questions about the firm they are targeting. Shareholder value is among the most important issues to consider when acquiring, merging or divesting, and any deal should be examined from this perspective.
Different brands have varying market reach, organisational capabilities and cultures, and teaming up with or taking over a brand will either deliver synergies in these areas or prove incompatible in the long run. Dealmakers need to ask themselves whether a merger or acquisition will lead to synergies in terms of resources, market share and brand portfolios themselves.
Compatibility is a vital consideration as each brand has its own identity and values. If these values are too different from one another, a merger may not work. A takeover or merger between two very different brands, in terms of outlook, philosophy and culture, could fall flat and dealmakers need to think about whether the brands involved will benefit from the deal or drag each other down.
If brand managers give their 'thumbs -up' to a deal, the first post-merger consideration is the process of deciding which brand to keep or whether to form a joint brand. This is often a sticking point for many post-merger brand managers. One brand can belong to the larger of the two companies but still hold less strength than that of the smaller firm. In this case, it could be wise to take the smaller firm’s brand post-merger. On the other hand, it could be simply the case of taking the acquirer or market leader’s brand as the merger may have been a simple position-strengthening exercise.
The primary factor when deciding which of two brands to use after a merger is to consider which brand will provide customers with the most value. Figures detailing why merged firms fail indicate that it is a new business’s inability to maintain revenue growth that causes failure, thus maximising customer value is clearly of great importance.
Opting to rebrand a large part of a newly merged firm can, of course, be a more costly option than keeping brands separate, which is usually the sensible option when a merger takes place between brands operating in very different geographical locations. However, analysts at Type2Consulting claim that some costs are ‘good costs’ if they help to drive revenue and profit down the line.
Joint branding is often chosen as a strategy if those involved with the deal are keen to continue to promote the merger as a positive move for customers and the market in general. Joint brands like Daimler-Chrysler and AOL-Time Warner have sat happily with customers and these joint brands have now created personalities in their own right. What’s more, Type2Consulting’s research report, ‘The Value Implications of Corporate Branding and Mergers,’ found that branding strategies that ensure elements of both brands are included in the merged brand generate more positive investor responses both immediately after the merger and three years down the line.
In conclusion, the impact of M&A activity on brands should not be underestimated. Indeed, with customer retention being central to the success of a deal, branding needs to be a priority consideration when deciding which firms to target and which to leave well alone.
