70-90% of M&A transactions never achieve the expected results. There are many reasons M&A’s fail, but among controllable factors, executing the wrong brand strategy stands out as one of the easiest to avoid – if you give branding the priority it deserves. 

In the past five years, more than 80,000 mergers and acquisitions have occurred in the US alone, with nearly $11 trillion changing hands (source: IMAA Institute). In 2019, a myriad of factors including tax reform, a favorable US regulatory climate, and growing cash reserves are fueling even more transactions, according to a 2019 Deloitte M&A trends report. 

 

Sadly, 70-90% of M&A transactions never achieve the expected results (source: HBR). There are many reasons M&A’s fail, some of which are outside management’s control. But among controllable factors, executing the wrong brand strategy stands out as one of the easiest to avoid – if you give branding the priority it deserves. 

Successful M&A = setting your brand strategy early

 

Management teams who successfully execute M&A understand the impact brands have on business and make branding a strategic priority, not an afterthought, and research proves they’re smart to do so. Harvard Business Review conducted a 16-year study of more than 450 firms across 47 industries and found that for B2B companies, the corporate brand is responsible for an average of 7% of stock performance. In the context of M&A, a brand empowers a business to translate the strategic rationale for the transaction into a value proposition for customers and employees. 

 

Download the M&A Brand Strategy Guide

 

But as we know, successful M&A is the exception, not the rule. In the madness of a transaction there are so many competing financial, operational and logistical priorities that it can feel necessary to put off “softer” issues like branding until after closing, when things settle down (which is a hilarious idea to anyone who’s been through it). Problem is, by not integrating brand strategy into the plan from the beginning, management teams create an even bigger challenge for themselves down the road, and miss out on the benefits of improved employee engagement and stronger customer loyalty that come with a thoughtful brand strategy. 

A brand empowers a business to translate the strategic rationale for the transaction into a value proposition for customers and employees. 

Transactions offer the rare opportunity to reposition a brand

 

At their most basic level, brands are the images and ideas customers have in their minds when they think of a company. Because brands exist in customers’ minds, it takes a lot of time and resources to influence how brands are perceived.

 

When spinning off of a parent company, changing ownership, merging with a competitor, or acquiring another company, businesses are given a rare opportunity to change the way they’re seen by customers relatively quickly. Once customers become aware of a transaction, they begin paying closer attention to their

experience with the company, trying to understand how this change will affect them. During this time, companies can leverage this increased customer engagement to re-position their brand, introduce a new brand or new products, communicate the value customers will see as a result of the transaction, and even overcome a negative brand image. Companies have the opportunity to wipe the slate clean and tell a new brand story, or to amplify the story already being told. It’s a rare chance to rethink how you want the market to see you and to revisit the customer experience.

 

And don’t forget your employees! A well-executed brand strategy supports change management in the organization, helping employees of both companies find a common purpose and culture, setting the tone for what it will be like to work for the new company, and giving everyone a clear sense of identity.

Developing your brand strategy: Research

 

A lot of research and diligence goes into the M&A process, and your brand strategy should be no different. Hire a reputable market research firm to evaluate perceptions of each brand involved in the transaction. Thorough research takes time, so plan accordingly and start early; think of it as an extension of your due diligence process. Here’s what you want to know:

 

   –  What do customers think of the companies and their products?

   –  What do customers want or expect from the new company?

   –  How well-known is each brand in the broader marketplace?

   –  What do vendors and employees think of the company and culture?

   –  How are logos, colors, and other brand imagery perceived?

Developing your brand strategy: Vision

 

An effective M&A brand strategy must support the overall goals of the transaction. Is your goal to create a vertically-integrated company that can bring new products to market faster? To expand your solutions portfolio? To become more cost competitive through better network efficiencies?

 

Whatever your goals, start with the end in mind when developing your brand strategy. Your brand will be the most impactful way of communicating the vision to both your customers and your employees, allowing them to experience the vision day in and day out by conveying the reason the business exists and how it intends to have an impact.

Developing your brand strategy: which one is right for you?

 

You’ve completed your research and understand the relative strengths and weaknesses of each brand involved in the transaction, and you’ve clarified the ideal future state of the brand, reflecting the vision which will be achieved by the transaction. Now, it’s time to choose the path forward.   

 

Because the “right” brand strategy depends on many variables, we’ve created a flowchart infographic to help you think through which of thse six basic brand strategies will work best for you.

Keep the Current Brand 

 

The simplest and also the most conservative branding strategy following M&A is to simply leave the acquired company brand alone. This strategy is best when the acquired company’s brand is viewed positively by the market, as the old adage “if it ain’t broke…” applies. Changing a brand arbitrarily can have lasting negative impact, so it’s sometimes best to leave well enough alone.

House of Brands

 

One of the most conservative ways to handle branding after M&A is to maintain a House of Brands, meaning both companies’ brands are kept as-is. This strategy is used most often when both companies have strong, well-known brands, or in mature categories where either brand’s position would be weakened by change. Proctor and Gamble is a great example of the House of Brands strategy.

Endorsed Brand

 

An Endorsed Brand strategy can help boost the credibility of a lesser known brand by associating it with a stronger parent company brand. It should be noted that this strategy is only effective when the parent brand is strong amongst the customers of the acquired company. A private equity or holding company that is well-respected by investors but unknown to the acquired company’s customers would not be a good candidate for an Endorsed Brand.

Stronger Horse

 

The Stronger Horse strategy involves consolidating both brands into the one which has more brand equity and a stronger customer base. Often it is the larger of the two companies whose brand prevails, but this is not always the case. An example of the “Reverse Stronger Horse”, where the smaller company brand absorbs the larger one, is when First Union acquired Wachovia, and the smaller Wachovia brand was used to help overcome First Union’s negative brand perception.

Fusion

 

Fusion branding is likely the most popular brand strategy for mergers. It works best when the two companies have similar purposes or brand visions. In fusion branding, logos and visual identities are merged, and often names as well, as in a classic example of fusion branding, ExxonMobil.

New Brand

 

The most aggressive option for branding after M&A is to create an entirely new brand. This can be the best choice for companies which will be significantly transformed in the eyes of the market following M&A. A good example is when Bell Atlantic and GTE merged to create a new brand “Verizon”.

Your M&A brand strategy is critical to a successful merger or acquisition. For help finding the right strategy for your transaction, contact the experts at Freshwater Marketing.

Guide to M&A Brand Strategy

Leveraging third-party research and hands-on experience, we’ve identified the four rules of successful M&A brand strategy to help management teams and investors select and execute the right brand strategy for every transaction.

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