Don’t Be Shortsighted with Branding in Mergers and Acquisitions

Posted on Feb 15, 2017 by

In a recent phone conversation with a client, we discussed how to incorporate a new acquisition into their brand portfolio. After considering the different options, the client finally admitted, “we aren’t sure what to do with this brand. The products fit our portfolio but the brand doesn’t.” Was I shocked? No. This happens more often than businesses like to admit. I’ve worked with companies on branding challenges for over 30 years, and recognize their tendency to be shortsighted in brand strategy when it comes to mergers and acquisitions (M&A).

Okay, I do understand some M&A situations arise quickly and are opportunistic business moves. While companies explore financial due diligence, product portfolios, and market attractiveness, marketing needs to look at how both the acquiring brand and the acquired brand will potentially affect each other and synergize in the long-term. The most important thing to avoid is brand confusion in the marketplace. Not only can this be a major detriment to business growth but also result in companies losing ground in the marketplace – requiring more resources and money to return to brand clarity.

Understanding the Brand Options

In the majority of M&A situations, there are four potential brand scenarios. Companies that have clearly designated their brand structure as a “branded house” or a “house of brands” find when M&A occur, they’re more likely to have long-term success.

 

  1. Brand Absorption

This is the preferred path for companies designated as a branded house (i.e. Apple, GE, FedEx, etc.). No matter the acquisition, the purchased brand is merged into the parent brand system. When FedEx purchased Kinkos, the Kinkos brand evolved into FedEx Office.

  1. Free-standing Brand

When a house of brands structure (i.e., P&G, Unilever, etc.) is in place, the acquired entity will maintain its own brand identity as a freestanding brand. Many consumer brands exchange hands without the average customer realizing it.

  1. Merged Brands

When two strong brands merge it is sometimes workable and beneficial to join the two brands as long as it does not become too lengthy and cumbersome. The merging of ExxonMoblie energy giants, and the SiriusXM satellite radio brands, and Kraft Heinz are successful examples.   

  1. New Brand

It may be advantageous to wipe the slate clean and introduce a new brand when combined naming is too cumbersome or if two troubled or weak brands merge. For example, a cumbersome name combination was avoided when paper fulfillment and logistics providers, xpedx and Unisource, merged to form Veritiv in 2014.

There are many factors that will drive the selection of one of these options. Whatever the reason, being proactive with a plan can save immense headaches, confusion, and money in the long run.

Four M&A Brand Headache Savers

Below are some key steps to help keep M&A activity from spinning out of control from a branding perspective.

 

  1. Have a Strategy in Place

As basic as this may seem, it is amazing how few companies who use M&A as a growth strategy, actually have a proactive brand plan in place. As part of any strategic planning, we encourage companies to include a brand component. As it relates to M&A, they should take the time to map out potential scenarios and how they could potentially affect their overall brand strategy – particularly the visual aspects of the brand. Most times this is left as an afterthought and it ends up looking that way. We often will include a page in a company’s Brand Standards (if one exists) establishing guidelines to consider in M&A situations.

 

  1. Don’t be afraid to seek outside help

Granted, M&A opportunities are often planned in secret. Sometimes as part of the due diligence process, it is beneficial to seek an outside perspective of a trusted brand design consultant – someone to help project the visual aspects of the proposed M&A. They can provide visual options of how the brand can be potentially realized.

 

  1. Make haste slowly

Having a proactive plan and guidelines in place can help accelerate the transition timeline. There will always be unique factors in an M&A situation that can affect timeline considerations. It is important not to skip or hurry the planning components and research (if needed) to select a correct strategy.

On the other hand, many companies drag their feet on the M&A transition, often creating more confusion in the marketplace. Sometimes the best solution in many cases is to “rip off the bandage” with an intense campaign (see below) explaining the new M&A relationships and then get on with business. If handled correctly, all key audiences, internal and external, can adjust as long as business disruption is minimal.

Also, don’t be too quick to discard the deactivated brand. There are stories of good brands left unattended and competitors picking them up to grow their market share. One company had a strong name in manufacturing and merged with another company thus dumping their name. When they realized the new name was not getting the desired traction, they went back to the old name and found someone had picked it up and trademarked it.

 

  1. Merge the brands, brand the merger

When an M&A occurs, the most important information employees, channel partners, customers, prospects, and the industry at large want to know is what are the new relationships and how will it affect doing business with the new entity.

This may be best done through a vigorous P.R. and multi-channel campaign that carefully explains what will stay the same and what is expected to change. Don’t be afraid to even brand the campaign. It’s fair to say any M&A is newsworthy in its respective markets. Be proactive about sharing the information. It’s okay if it’s not all figured out organizationally. In the case of the xpedx and Unisource merger, there were so many moving parts and relationships to consider that Veritiv wisely stated all business units would operate as they had pre-merger for the first year; this gave them time to properly set up the new organization before moving forward as a new brand.

There will always be glitches in M&A activities but wise companies plan ahead for most contingencies and keep the lines of communication open.

If you are in the midst of an M&A situation and have brand questions or want to put a proactive plan together, please contact us at 920-725-4848 or info@brand-directions.com


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