Branding During M&A: Beating the Odds
Recent research suggests that the majority of mergers and acquisitions end up destroying rather than creating value. Brands are often core assets within M&A deals, but a carefully thought-out brand strategy and its implications are often not prioritized in the process.
- A clear and well-laid-out brand strategy is vital for a smooth transition during M&A and for the greatest chance of success post deal.
- A range of strategies exist, each of which has multiple sub-variations. Companies can subsume one brand into another, combine the entities, create something entirely new or allow each brand to continue unchanged.
- Regardless of which approach you take, M&A is a great opportunity to clarify and strengthen your company’s brand and what you want it to mean for customers, employees and investors.
Despite their popularity, most estimates suggest that at least sixty percent or more of mergers and acquisitions end up destroying rather than creating or maintaining shareholder value.1 The results of these failed deals range from large write-downs, an exodus of talent, rapid subsequent divestiture of the acquired company or even bankruptcy.2 While there are numerous reasons for the failures, one key factor is often the lack of a carefully considered and effective brand strategy for the new entity. There are a number of options, including merging the two businesses, creating something completely new or letting each company operate independently. These are crucial decisions on which the success of the merger and acquisition rests.
How can you beat the odds with your merger or acquisition?
In this paper, we will discuss the centrality of branding to successful M&A, considering the various strategies for what to do with the new entity based on the needs of key stakeholders, including customers, investors and employees. We will highlight examples of each approach and how to consider what might be right for you.
Branding is often neglected during the M&A process in favor of financial, operational and logistical concerns. When companies do consider branding it is often after the merger, and as a way to deal with challenges rather than prevent them. That’s a big mistake. A clear brand strategy can make the transition much smoother and provide useful opportunities to deliver a strong message internally and externally about the value of the combined entity. The branding decisions communicate strategic intent, offering timely and clear signals to key stakeholders that keep the relationship strong and valued.
Mergers can be challenging and lead to confusion and resentment; take the opportunity to improve on strengths and carefully develop and refine the message of the brand(s) moving forward. When the branding decisions are made after the fact, it is often too late: damage to employee morale, customer satisfaction and the valuation of the company has already happened. Instead, companies should make key decisions heading into the merger, asking what to keep, what to get rid of, what to combine and what to create from scratch.
Most mergers tend to choose one of two options: either subsuming the target company into the brand of the acquirer, or allowing each brand to continue as if independent. While there are advantages to these approaches, they are often used because they are the easiest rather than the most effective, and their particular disadvantages are not considered in enough depth. Other options may be more effective and better serve the specific companies in question.
During a merger, companies have four broad branding options with multiple variations within each option (we follow here the basic framework established by Ettenson and Knowles, 2006).3 They can subsume one brand into another (Back the Stronger Brand), blend the two companies together (Blend), create something entirely new (New Brand) or allow each company to operate as before, perhaps with some slight operational streamlining (No Change). There are advantages and disadvantages to each approach, and it is vital for the company to carefully consider which option might be best for them, based on key factors including the existing brand equity of the target and the acquiring brands, employee engagement in each, market positioning, visual identity and customer perceptions and experience.