Brands & Ownership Changes

It is a sad day when a previously meaningful and vibrant brand is taken over by or combined with a new entity that does not share the brand’s essence, promise, and values. This happens quite often, with mergers and acquisitions, when a company is taken private or public, or with other changes in ownership or leadership. Sometimes it happens when a financial owner (such as a venture capital firm) replaces the previous management team with its own new team. This is particularly true when people who only understand one thing, ROI (or, more specifically, their personal financial gain), replace the leadership team that had the original brand vision. We saw this happen when General Motors took back control of Saturn, tossing out Saturn’s “different kind of company” operating philosophy and forcing it to run like any other GM brand. Likewise, Compaq once owned 20 percent of the personal computer market, but mismanagement of the brand after Hewlett-Packard acquired it eventually resulted in its complete demise. Quaker Oats 1994 acquisition of the Snapple brand led to huge sales decreases, going from $1.2 billion to $500 million in 27 months. Sprint's takeover of Nextel was a disaster. Sprint had catered to the consumer market, while Nextel concentrated on the business market. Soon after the merger, large numbers of Nextel executives and employees left citing cultural differences between the two brands. Sprint was bureaucratic, while Nextel was much more entrepreneurial. The integration never was executed properly. Jaeger lost its way since its takeover in 2012. And recall the impact on Daraprim's reputation when Turing Pharmaceuticals acquired it from Impax Laboratories and Turing's CEO Martin Shkerli (former hedge fund co-founder) raised that lifesaving AIDS medication's price from $13.50 a pill to $750 a pill overnight. Shkerli was later arrested for securities fraud by the FBI. 

Such a change is akin to a person’s spirit exiting his or her body to allow a new spirit to inhabit it. While the newly combined physical/spiritual entity may seem to be the same entity as before, new attitudes and behaviors will eventually betray the new spirit, but not until after the huge reservoir of brand equity is traded for short-term financial gains for the new owners. This is one reason previously strong brands seem to “lose their way.”

Much of this was reprinted from Brand Aid, second edition, available here.

Branding Issues for Mergers & Acquisitions

Branding issues are myriad for mergers & acquisitions.

First there is the question of why the merger or acquisition is even being considered. What is the purpose of the merger or acquisition? Is it to extend the company’s geographic range? Is it to extend the company’s appeal across new market segments? Is it to move the company’s offering upscale or downscale? Is it to fill in a product or service gap? Is it to fill in a technology gap? Is it to acquire a proprietary product feature or technology? Is it to round out the company’s brand portfolio? Is it to gain greater economies of scale? Is it to leverage potential synergies? Are you trying to pick up a distressed brand in a “fire sale”? If so, are you hoping to turn that brand around with smart management? Do you have a deep understanding of what that brand’s problems are? Or is the acquisition a non-strategic investment to make use of excess cash flow?

Once the reason for the merger or acquisition is clear, then it is time to think about what the terms of the deal will be. There are at least a few brand-related questions at this stage. What is each brand’s value? How much should you pay for the acquired brand? What intangible benefits does the acquired brand bring to you? What is the brand’s awareness level among key customer segments? What are the brand’s associations? Are the associations mostly positive, mostly negative or something in between? Does this brand complement your existing brand in some way or is it redundant? Or, worse yet, is it associated with things that you do not want your brand associated with?

There are also the questions regarding merged cultures and how that is likely to play out. Which elements of each culture should remain and which ones should be changed? These decisions will affect how the remaining brands will be perceived in the marketplace.

The next thing to decide is which brands stay and which brands go. Was the original intention to move to one brand or to build a brand portfolio? Combining brands may or may not make sense given the relative awareness and associations of each brand. You must also consider how these play out with different target customers and audiences. Combining brands is likely to save money in the long run but is also likely to cost money in the nearer term because the brand’s identity on signage, business cards, vehicles, employee uniforms and other media must change along with any brand change.

Keeping one, the other or both brands are not the only three options. You might decide it is best to create an entirely new brand for the newly combined organization. Or you might decide on a sub-brand or endorsed brand structure, in which you use two or (hopefully not) more brands together.

Once you have decided on the brand portfolio and architecture, then you must decide how you will transition from your current brand structure to the post merger or acquisition structure.  It can be a one- or two-step process and the steps might be triggered by external benchmarks such as degree of brand equity transfer. Finally, you must decide if everything will change at once for each transition step or if it will happen gradually based on budget constraints, depletion of inventories and natural obsolescence.

Ideally, the publicity generated by the merger or acquisition and any brand change creates the perfect opportunity to announce any new mission, vision or strategies to the world (or at least your target audiences). You should have carefully thought this through and scripted the messaging in time for the marketplace announcement.

Another thing we have noticed is that companies that participate in mergers & acquisitions usually don’t stop at one. More M&A activity is typically in process or on the way. This must be taken into consideration too. The approach one takes to address today’s merger or acquisition must be flexible enough to accommodate future mergers & acquisitions.  Sometimes you need to slow the process down or speed it up to address a string of mergers or acquisitions.

And I haven’t even touched on the brand identity considerations themselves, including naming, icons, color palettes, typography and visual styles. These are all tactics after the strategies have been determined.

The entire process should be based on the organization’s strategic intent informed by market research.

I hope this has helped you think through some of the branding implications of mergers & acquisitions.

Brand Architecture and M&A

We are frequently called upon to help with brand architecture issues.  When a company grows through mergers and acquisitions it usually has a large portfolio of brands at least some of which are redundant. The key question becomes, “Which brands become rationalized and how should this be managed to minimize negative consequences while maximizing positive consequences?”

We have also had to help companies make decisions about brands that have been positioned differently in different regions of a country or the world. We have one client whose brands span a range from basic to premium, however in some places one brand is the premium brand, while in other places it is the basic brand. We have had clients that want to take strong regional master brands out nationally but repositioned for specific market segments. How does this affect existing regional customers who view those brands more broadly?

After a number of acquisitions, some companies hope to offer identical products under different brand names. Some companies do this by creating common product lines with common identities across different parent brands. This can become quite confusing and diluting.

Growing through M&A can also cause channel conflict issues. Now the wrong brands are in the wrong channels from certain retailers’ perspectives. Particularly powerful retailers have told some clients how they should position their brands within their stores. However, this is often out of step with how those manufacturers need to position those brands within their portfolios.

In M&A, the biggest problem is almost always the presence of too many brands. The system gets too complex. We worked with one company that had acquired dozens of companies that offered very similar products in the same categories. When we were retained, all of the acquired brands were intact. The client had been producing dozens of product catalogs selling virtually identical products under different brand and product names to the same customers.

Not only are complex brand architectures difficult and expensive to manage, but they are also confusing to customers. The trick is to simplify them in ways that make sense to customers without destroying brand equity-related value or alienating existing customers. Simplifying brand architecture after multiple mergers and acquisitions is necessary. It should be approached with careful analysis and forethought.