Supporting A Brand During M&A – A How-To Guide

Supporting A Brand During M&A – A How-To Guide

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Essential Brand Stewardship During M & A

Mergers & Acquisitions (M&A) activity has accelerated for the last several years, supported by an unprecedented economic rebound in the US. M&A activity continues to drive forward new companies and combinations of previously existing ones, necessitating concerted effort to conserve and extend brand value throughout the M&A processes.

Executive Summary
Retain, Discard or Combine Brands

  • Mergers and acquisitions are complicated pirouettes that not only rely on sound financial and other synergies for success, but also the appropriate treatment of the resulting brand identity.

  • Organizations need to prepare for how the new brand affects both internal stakeholders as well as consumers and the outside market.

  • There are three principal formats for how to treat a brand post-M&A, and organizations need to weigh carefully the balance of maintaining both brands independently, sunsetting one of the brands or combining the two to create an entirely new brand.

M&A Basics- What’s the Point?

There are multiple motives for why two organizations would decide to either merge as equal entities, or for one organization to fully acquire another- many of them overlapping. Some companies recognize that there are potential synergies in their operational structure, for example in their marketing or purchasing departments, and that bringing the companies together would create an efficient economy of scale that would drive down overhead to reduce costs.

Many M&A decisions, however, aren’t motivated by operational savings, but by a strategic opportunity to capture valuable intellectual property or an existing client base. This is frequently the case in the technology and pharmaceutical industries, where companies like Apple, Google, Bristol-Myers Squibb, Sanofi Aventis and their brethren snap up organizations which can augment their vast product portfolios.

M&A decisions also have more tactical motivations. A well-executed acquisition can help a company enter a new geography, for example, or even eliminate a pesky competitor. In the latter case, if a competitor has a particular area of strength, or has proven able to shorten time-to-market, it may be an attractive target. After all, why reinvent the wheel if you can simply buy an existing one?

Branding M&A Beyond the Numbers

Most M&A decisions are based on a calculus of factors that are principally financial in nature. Do the numbers add up? Will the combined company improve the eventual financial health of the organization?

There are also important, if more nuanced factors to take into account in an M&A decision, many revolving around brand. All organizations are comprised of people. Most organizations expend substantial time and money into developing high-functioning teams that accomplish their particular tasks with fluidity. However, all of that is thrown into flux with M&A activity, in particular the marketing and communications teams responsible for the public’s perception of the organization. It’s imperative to define a brand succession plan beforehand that identifies key brand stakeholders in the organization and lays out their M&A roadmap.

News of a merger or acquisition often surprises the external market. All essential qualities of a good brand that resonate across employees and consumers – trust, quality, image, product, etc. –  are now called into question, with diverse stakeholders asking themselves (and others), “is the brand I formerly knew and loved going to be the same in its new incarnation?”

Critical M&A Branding Decisions

When it comes to M&A branding, there are three broad options companies can apply to manage their public-facing brand: keep two wholly separate brands, maintain one brand and eliminate the other or find a way to combine the two.

All three options offer plusses and minuses, with multiple factors organizations must weigh against each other and incorporate into the broader algorithm of other decision factors:

Keep separate brands
In this case, from a consumer point of view, the M&A activity is done purely behind the scenes, with no visible impact on the outside market. The M&A action is operational, with back-office activities like purchasing, marketing, HR, etc. combined to provide operational synergies. Large FMCG organizations such as P&G often apply this strategy to add beloved consumer brands to their portfolio of product lines without touching the brand itself. This course of action preserves value when existing and acquired brands are strong to avoid dilution to individual brand equity.

Choose one brand over the other
Here, one brand is subsumed by the other, with the former often “sunsetted.” This decision makes the most sense when one brand is clearly stronger than the other, due to brand equity or simple sheer size. Examples include tech companies like Apple, Google and Microsoft which constantly buy smaller companies and integrate their IP and user base into the parent brand. Exceptions like Microsoft preserving the LinkedIn brand exist when acquisitions have a significant independent user base and equity. When brands sunset employee morale of the acquired brand often flags, as generally only the top executives of the acquired company receive substantial financial benefit after the buy-out. There is also the potential for flight risk from the user base, wary of the continuity of service or quality the original brand offered.Heinz and Kraft Food

Combine the brands
This is the most complicated of the three options and demands the most careful branding as it essentially requires the construction of a completely new brand, from scratch, incorporating the best facets of the two original companies. There is generally a high short-term brand equity cost in the public’s mind, but the ultimate result can be near-term pain for long-term gain. This type of M&A frequently involves new logos, websites, slogans, positioning, marketing materials and extensive public relations and social media outreach. Examples of successful brand combinations are Heinz and Kraft Food, Dow Chemical and DuPont, ExxonMobil and Verizon.

Now It’s Your Turn
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