M&A Brand Identity Decisions

In this episode of Real-World Branding, our President and host, Bill Gullan takes on 3 common themes we’ve been hearing from our clients regarding the remainder of 2022. He also covers, at length, how to handle brand identity choices in the wake of M&A Activity. 

Check out our Rebranding Strategies for M&A blog and Download a copy of our M&A Branding Playbook.

Transcription:

Bill Gullan:

Greetings one and all. This is Real-World Branding. I’m Bill Gullan, president of Finch Brands, a premier boutique brand consultancy, and thank you for joining us. I am recording this on the afternoon of Thursday, November 3rd. Couple of big things about today, one, my 49th birthday, believe it or not. I know I look tremendously youthful and vibrant or sound that way, but yeah, a lot of water under the bridge. So anyway, I’m excited about that. Also, big sports night for we Philadelphians tonight, game six for the Phillies in the World Series. By the time you listen to this, I will either be crushed or riding on air, one or the other, but high hopes for the Phils and the Eagles also on Thursday Night Football. Philadelphia Union this weekend, a lot going on. And it’s Autumn, Halloween’s past, great things are happening.

 For those of you who receive our newsletter, we wrote to you earlier this week just with a kind of check in and the state of play here, I guess, as we enter really the last kind of six working weeks of the year, there were a couple things we wanted to remind folks of. We talked to a lot of our clients and in the past it was, we heard a lot of this, with extra budget and the fiscal’s about to flip and here’s some things we need to do. We’re kind of hearing three things at this point. The first is that there are some folks who are sitting on some budget. We can of course help you with that if you’d like to give us a call about anything. But two other things that we’ve heard a fair amount of, one, the second, I guess, which we’ve heard a lot of is, “Geez, it’s November already. We have a key initiative that we really need to make meaningful progress on before the end of the year.”

And a couple things that we can do at Finch to help with that. The most primary, I think is, and we’ve talked about that in this space as well as online, is a sprint methodology. We’ve built a sprint methodology that really is designed to pack into a really kind of tight and intensive five to six week period initiatives around brand and rebranding, initiatives around innovation, initiatives around sort of key insights. We’ve built methods within sort of a sprint model that enable us, along with clients, to make really meaningful progress on key topics in a really sort of compact period of time, to include customer consumer insights, to include brainstorming and sort of facilitation of key decisions and building key ideas into frameworks, et cetera. So there’s a lot that we can do between now and the end of the year even to make really, really big progress. 

The third thing I think we’re hearing from clients right now is, “I don’t maybe have to make huge progress before the end of the year, but I have to get a key initiative ready to rock come January, 2023.” And there’s a couple things we can do to support that. One, within our insights community offering some clients we’ve heard either they have an insights community and they sort of don’t feel like they’re getting as much out of it as they should. Or they have one and whether they’re getting enough out of it or not, the thought of changing is so exhausting because they think it’s difficult, it’s really not. And we have some content around how to pivot insights communities from one provider to another or how to, in some cases, reinitiate, I guess, insights communities to put them at a level of productivity and excellence that all of our clients in every company deserves to make that investment. And so that content could be found online as well. Maybe we’ll put it in the show notes here. 

So my commercial is over, but you’re not done with me. We’re going to talk today, and I’m going to really do it via soliloquy, about one particular facet of M&A brand decision making. We have thrown a lot of content from us to you about how to handle brand choices in the wake of M&A activity. The reason we have really emphasized that, one, we do a lot of it. Two, we’ve built a lot of best practices and learned a lot of valuable lessons by doing as much of it as we do that we can help folks. Three, there’s a tremendous pace of industry consolidation and acquisition everywhere you look, whether it’s private equity involved or not, there’s just a ton of M&A activity. And we find that even the most accomplished CEOs, and CMOs, and others find that integration period to be distinctively challenging. It’s not a business as usual moment for marketers or for leaders or for HR leaders.

It’s not, of course you’re continuing to do the key kind of business as usual tasks, but all of the decision making around M&A is really different, and it’s unusual in terms of what folks, again, even the senior most effective senior leaders, it’s kind of a different set of muscles and we’re just trying to share the knowledge that we’ve gained along the way with folks who find themselves in that position. And as noted it is, pardon me, our belief that brand choices often are overlooked within an M&A work stream. Value capture is certainly front and center, leadership team formation and kind of HR evolution, systems and technology. These are things that people think about with M&A and they often, either internally or through external partners, make these big priorities.

It is our belief though that bad or an inability to make brand choices that are attendant to any merger or acquisition process often results in meaningful value destruction, it retards momentum that should come along with a well struck deal. And we’re here to add value to firms that are kind of in that moment. But one of the key choices that needs to be made in association with M&A activity is really at the level of identity, that’s name and logo for lack of a better sort of bracketing. And there’s a lot that proceeds that choice in terms of research, and stakeholder input, and thinking through the positives and the drawbacks of various option sets. And there’s a lot, obviously, that comes after, bringing the identity to life, and managing day one, and going to market with power and purpose. But the identity choice specifically is based on a situational and fascinating set of questions.

We’ve put, and you can find written versions of this copy on our site and I think at least linked to in our social, but there seemed to be really four highest level styles of choices, if you will, as it relates to identity in the wake of M&A activity. And just to set this up, one more thing, final drum roll and then I’ll get to the four. Assuming that a merger or an acquisition is a significant enough deal that it really changes fundamentally the structure, and the position, and the vision, and the opportunity of a company, that’s when the identity question comes to the fore. What should the go forward entity be called? Is it one of the existing names, or both of the existing names, or something new? And how ought it to look, from logo, visual identity, all the way downstream? There are some cases, as noted, where there’s a lot of change and there’s some cases where there’s not much. And so here are really the four different methods and we’re going to take them on the continuum from the most conservative method to the most aggressive method, but we’ll go through them one at a time.

 The first is no change. It’s the most conservative strategy because if the acquiring company keeps its brand and so do all the other sort of partners in the deal, and there may be some back office efficiencies, but the go-to-market brand expression really doesn’t change and all entities are sort of still perceived independently, you’re not risking the destruction of brand equity by removing names from the marketplace or logos from the marketplace. But at the same time, you may also not be seizing the benefits and power of a redoubled and unified sense of purpose for the organization. We find that the no change approach is generally best used in categories that are mature, where the brands in question are already widely known and clearly differentiated, and that moving in the direction of one brand or another or something new would really undercut the equity that’s already been built.

We see also no change maybe to be most prominent in the consumer landscape. One of the famous house of brands in the world is Procter & Gamble. And when they acquired Gillette, just as with all the brands that they incubate internally, the strategy is not to link them in an overt portfolio manner. Procter & Gamble’s really a name for the capital markets sphere and the HR sphere. It is not a name that consumers interact with all that frequently because its brands have their own identities and they operate more or less independently. So when Gillette was acquired, they just kept it. And Cincinnati I guess became, where P&G’s headquartered, probably became the nerve center. And there were certain shared services that those who work on Gillette probably availed themselves of. But from a perceptual perspective in the marketplace, Gillette remains as it always has been with its master brand Gillette and its sub brand.

 So in some cases, no change has a benefit of signaling continuity to stakeholders internally and externally. It may make, on the internal side, all team members sort of feel valued. Those who have put the work into making the brand covetable and coveted. But again, what it may do perceptually is to postpone or hold back integration, which can be beneficial if the new brand goes to market with a vision and a sense of self. There’s really no brand equity transfer, so the most conservative path here is to really make no change. Acquire the company, redefine or make more efficient the back office, but to have the go-to-market brand structure just remain as it was. And that’s one approach.

The next one on that continuum from most conservative to most aggressive is what we would call fusion. This is the second most conservative approach. And fusion is a strategy that involves using brand identity assets, name, or logo, or some combination really from both partners, or both companies, or all companies in a merger or an acquisition. I mean, there’s a lot of examples of that, Exxon and Mobile, ExxonMobil they became, et cetera. And so if you integrate, if you create a new corporate identity, nomenclaturally and visually, and you take equal doses or doses from both, then we would call that fusion.

There’s a couple different types of fusion. One is straight fusion, ExxonMobil’s a perfect example of that. They merged in 1998 and they basically just mashed up the names. In some cases there’s a refreshed fusion where names are combined, but there might be a new look and feel, there may be a new logo. The benefit of that is while you keep the names alive and the equity alive from the equal sort of parts of the deal, that new logo or visual refresh does convey some level of newness and forward looking inspiration. Another way to do it is what we might call a hybrid fusion. That’s where you combine the names and visual elements. So when United acquired Continental Airlines, the brand identity remained the United name, but started using the Continental logo. That was a way to bring the equities together and to convey that something was changing, and so it was a mixture of brand assets.

And then there’s another strategy that we might call endorsed fusion. That’s when a lead company endorses the acquisition in terms of brand architecture. So whenever you see a blank company, or, “Powered by…” blank, and the blank is the acquirer or the largest company, and the brand that is over top of that is the acquired company, that is what we would call an endorsed fusion. Now often an endorsed fusion is a migration strategy and that those names will coexist for a period of time and sometimes the acquired name will go away. But fusion approaches are more conservative because they’re really about managing risk as opposed to activating potential. They prevent and are meant to prevent large scale customer alienation or confusion, I guess as well as internal alienation. While sometimes I guess the drawback is that it creates something that can be clunky, ExxonMobil’s kind of clunky and long or brand scenarios that don’t really work well together, but they’re convenient.

So you’re mashing up brand equities and while that may convey the notion of a shared future, there is still some risk of alienation, particularly if those companies were previously competitors. And there’s also a sense that it’s transitional and not permanent when you’re just mashing things together. It’s, “What does this new company seek to be?” Not just the aggregation of the assets of the previous company, but you really sort of abdicate that responsibility to conveying further vision with your go forward brand identity. And there’s a lot of reasons to do it as well. So as with all these, there’s trade offs, there’s benefits and drawbacks. The third one, and again we’re going on that left to continuum for most conservative to least conservative is what we call stronger horse. The stronger horse strategy is when one brand, and it’s typically the larger or more established company in the deal, is elevated, whether based on size, or market share, or reputation, or whatever, the stronger horse, immediately or gradually, subsumes those organizations or the organization that’s been acquired.

So this is a clear and decisive approach that elevates, hopefully, a strong brand with momentum. And that’s a positive in many instances. The downside though of a stronger horse is that you are risking the destruction of brand equity. In some cases, a smaller company that may be acquired by a larger company might have a really well defined market niche where there’s tremendous loyalty and value. It may have a sterling reputation or it may have other forms of equity that are meaningful. And so if those brands cease to exist, there is a risk of something being lost. The benefit being sort of clarity and direction, the drawback being that potential risk. Again, there’s a couple different stronger horse flavors or options if you will. The sort of stronger horse forward is what I described. Large company acquires smaller, smaller company brand fades away. That makes sense. .

There is and has been, and they’re really interesting when it happens, what we would call a reverse stronger horse is where the identity of the acquired or smaller business becomes the master brand. That’s fascinating. I remember one of the best examples, and I remember it, the big bank First Union acquired Wachovia. This was a while back, so you may or may not recall. First Union acquired Wachovia. First Union was probably seven times as large, and I’m sure their market awareness was a multiplier of Wachovia’s, but they had been on an acquisition spree. There was some brand baggage and reputational baggage. And for that reason, and again despite the fact that Wachovia was much smaller than First Union, the rebranding made the decision to put Wachovia in the lead position. Wachovia was well regarded in its markets. I think it was its home town I think was Winston-Salem, North Carolina. And so in the Carolinas they got to keep a brand that they really loved and respected. And then in new markets, First Union had the benefit of, with all of their budget, introducing the Wachovia name.

And so best of both worlds, you got to replace a brand that had some damage with something that was new and fresh, whereas you also spared that positive brand equity that Wachovia had in its existing markets. Now the challenge there, and I guess the downside there, is that First Union, for all of its perceptual challenges, was really trading a known brand equity for a much lesser known brand equity. And so there were tremendous investments associated with that from all of the signage and all of the brand introduction, advertising, and everything else. So reverse stronger horse is interesting and it’s used sparingly I think for good reasons.

Then there is a phase stronger horse, which I think we probably see the most. There’s a temporary combination of brand identities or an endorsement that ultimately ends up with a stronger horse brand situation. That’s sort of like the phase no change that we talked about too, or pardon me, fusion where over time the stronger brand remains and the other brand, after a migration, sort of fades away. This approach makes sense for a variety of reasons. It buys time for leaders to port over brand equity carefully as well as make long term decisions. It enables you to bring the customer along step by step as well as the internal team regarding the company’s future and vision. And then the last type of stronger horse identity decision is if the name of the lead… It’s called refresh stronger horse, the name of the lead company’s adopted, but a new logo, or a new symbol, or a new color scheme is implemented to reflect the fact that there has been some change.

So again, that example with United and Continental maybe fits into fusion, because it was for a period of time, but ultimately really resembles the refresh stronger horse, United was bigger. But in the case of refresh stronger horse, you’re creating something new. You’re not using the logo of the acquired company. So the benefit there is you keep the strength and clarity of the master brand while also heralding that something’s happened, and something’s new, and something’s interesting. So United Healthcare was acquired by Humana. They kept the Humana name but had a new visual identity to represent what was, at that point, a bigger, stronger, broadening Humana organization. So that’s the third.

The most aggressive brand identity strategy in the wake of M&A activity is a new brand altogether. And it’s aggressive because there is always a failure risk with new brand development. Not to mention tremendous outlays of budget to educate the market on what you’re called, what it means, why, and what’s going to change and what’s going to stay the same. We find that the new brand creation decision is usually most appropriate in categories that are undergoing an extreme level of transformation in which the merging entities really need to signal that they are evolving together. So a classic example, it’s been a while, is when GTE and Bell Atlantic who were two kind of old line, long distance, wire line phone companies were merging.

And when that happened around the turn of the century, this was when telephony was really moving towards a more mobile future. And so I can imagine, I wasn’t in the room, but I can imagine those in the room deciding what the name should be, Bell Atlantic and GTE both had geographic footprints. They both were, again, associated with sort of old Ma Bell, the sort of traditional style of telephony. And neither of those brands, though they had both entered wireless and mobile, neither of them were really known for it. And so they got together and created a new identity, which is a name we all know, and that’s Verizon. Telecom was moving strongly. It was an approach that did risk the equity of each brand, both were prominent, but it placed a bet on a future that was going to be strong, and shared, and innovative, and different.

In order for the Verizon brand to take hold, they had to spend hundreds of millions of dollars. Part of that’s because it’s been 20 years. Part of it’s also because Verizon has expanded into, well, air quotes, “Cable.” with Fios, they’ve expanded into other businesses. And they’re a national player and a global player, they need to be, and so a lot of money to build that. But in the early stages it took a lot to introduce the marketplace into what this new brand was, how to pronounce it, what it meant, and the company that was really sort of representing it and what their vision was for the future. Creating a new brand’s costly, it’s time consuming. It is risky because you are really forfeiting brand equity and needing to create new customer relationships that, in many cases, took decades to create in the first place.

But the upside is real, it’s an ability to own the story and create something new to embrace a changing world. So those are really the four prevailing buckets, if you will, of identity change in the wake of M&A activity. And again, there’s conservative approaches, no change all the way down that continuum, into the most aggressive, which is this new brand creation. And as we say, full caveats here, making the right choice is important because it sends signals to key stakeholders. It helps the go-to-market approach of the emergent entity, but the right choice is always situational.

There are a bunch of factors here from the individual heritage and level of equity of the companies in the deal, to the dynamics of the category, to customer and prospect perceptions, also to cultural and internal perception. There’s a lot to think about and a lot to untangle within the overall M&A brand decision making process, but particularly as it relates to this identity choice. And the answer that you arrive to and how well it’s executed really, really matters in terms of maximizing upside while mitigating the risk of customer alienation or brand equity destruction that sometimes is a great concern in an M&A situation.

 So I’ll stop there. We have a ton of content around M&A as a whole, and how to make smart brand choices, and how to build high integrity processes to make those choices within M&A. If you are stuck or curious give us a call. We’ll be glad to talk about it with you. But yeah, related to the identity choice specifically, we also have some copy on our website and beyond. I’d be glad to, again, talk about it with you just as a friend, informally, or if there is an opportunity for Finch to serve, we always, of course, seek to earn the right to do that. Thank you for being with us on real world branding as always. There’s three ways to support what we do here. We know that our cadence has been a bit intermittent, but we’re hoping to get back as we move through Q4 and certainly into the first of the year on a regular timetable.

But those three ways are, one, rate and review within the podcast store or app of your choice, wherever you get your podcasts, or writing a review helps us know how you’re thinking about what we do as well as helps us get found by others who might find value in this content. The second is to click that subscribe button. If you subscribe, you will never miss an episode. If you open your podcast app, it will float down magically from the heavens, from the sky above, from the ether. And whenever we have new content, it will be there, rather than relying on us to post something on social or you to wonder and have to kind of get them one at a time. And then the last thing is let’s keep this dialogue going on Twitter @BillGullan, @FinchBrands, in other ways, social media, email, whatever you’d like. We love feedback, we love ideas for future topics, future guests, et cetera. And that really is what makes this, that dialogue is what makes this so enjoyable for us to do when we do it. And so that’s about it. Good luck to the Phillies, Eagles, Union, everybody else. We’ll sign off from the Cradle of Liberty.