The Role of Brand in M&A Success
Given the importance of branding in conjunction with an M&A event, one might expect that it is among the most deeply considered topics of any deal. However, in the wake of the countless complex decisions that the leadership team is required to make before, during, and after a merger, the core brand choices are often rushed and poorly planned.
Mergers and acquisitions have long been a key strategy for businesses across the globe. The idea that combining the people, product lines, technology, and logistics of two organizations will take the joint business to new heights – through driving growth and increased efficiency. In 2016 alone, there were over 45,000 M&A transactions worldwide.
With the wealth of M&A activity each year, it is staggering to learn that the failure rate of mergers and acquisitions is said to be between 70-90% and that poorly conceived or executed mergers and acquisitions destroyed more than $200 Billion in shareholder value in a 20 year period. In summary, Ashwath Damodaran, Professor at NYU Stern, says, “More value is destroyed by acquisitions than any other single action taken by companies.”
Many factors contribute to failed M&A, yet the keys to success often rely on less tangible factors than on just financials or operational integration. Marketplace rejection and lack of stakeholder engagement are two major causes of M&A failure – and both can be at least partially enriched by thoughtful brand decision-making.
What’s in a Brand?
Brand is a concept that is far larger and more nuanced than the way that it is commonly used. Seth Godin defines it as ‘a set of expectations, memories, stories, and relationships that when taken together account for a decision to choose one product or service over another.’
Ultimately a brand is all of the content related to the image, personality, or attributes of a product, service, or organization. The artifacts of a well-constructed brand include name, logo, symbols, colors, packaging, values, messaging and storytelling, etc. In an M&A situation, there are many choices that must be made related to the brand – such as Vision/Mission of the new entity, name, logo system, message, etc. These are fundamental to how the new entity is perceived and received.
The brand questions and the decisions leadership makes play a crucial role in unifying the merged entity and maximizing long-term value. Decisions about the brand are used to signal the rationale – both financial and strategic – following a merger or acquisition. Go-forward brand strategy translates how a merger or acquisition makes sense and establishes a compelling vision for the combined entity that resonates with employees, customers, and the outside world.
Analysts believe that clashing corporate cultures is one of the leading hindrances to integration following a merger or acquisition. Thus, there is a clear and present need to communicate with affected teams on the impact of M&A.
Employees on all sides need to understand the future of the organization. For employees of the acquired organization, there is understandable concern about the future and there may be a natural distrust of the acquiring company (even more so if the companies were competitors). Oftentimes, employees are worried that departmental efficiencies will result in job loss or that changes in structure, processes, or culture will significantly change their day-to-day role.
While members of the acquiring organization will likely share some of the above anxieties, they can also develop a ‘conquering army mentality.’ While this may happen more often than it should, it is important for the team to understand that their new colleagues were an integral contributor to the value that drove the transaction.
Once the structural impact is clear and team members know their individual fates, brand choices send signals about what the company seeks to be – and speaks volumes about strategy and values. The brand decision and communication provides direction and inspiration for the journey the new company will take to accelerate profitable growth and activate the full potential of the transaction.
The nature of the customer interaction depends on the business type – but in all cases, from banking to technology to consumer packaged goods, brand choices telegraph where the company is headed, how it sees itself, which values/attributes it seeks to emphasize, and more.
Customers will want to know that all of the operational complexities of integration won’t detract from the level of service they have come to expect from their partner. They want to know (and the company wants them to know) why the acquisition will make life better for them – new products, capabilities, etc. Their questions will even extend down to the day-to-day interaction – will I be dealing with the same people I’ve grown to trust? Will my pricing and contract terms stay the same or change?
What about customers of one company that have specifically chosen not to work with the other company involved in the merger or acquisition? What about prospective customers who are in buying mode? What about lapsed customers where win-back is the overriding objective?
There are many different customer segments in the market and brand strategy impacts them all. Communicating with customers throughout a merger process demonstrates a sensitivity and commitment to customer needs.
This is a diverse category that includes investors (where appropriate), partners, and other entities that occupy a place in the often-complex web of stakeholders. These groups may not have the same emotional attachment to the brands in question, but they are watching closely for the signals brand choices send about the go-forward company and its vision for the future.
While these groups often have unique motivations, all of them are interested in the success of the new entity. Given the failure rate of most mergers and acquisitions, a well-developed brand strategy provides peace of mind and signifies that the leadership team is confident and decisive.
When mergers and acquisitions lack a definitive brand strategy, communications to key stakeholders are poorly executed and fail to convey the benefit or vision of the collective organization. So the stakes are clear – to activate the full potential of M&A, investors, executives, and integration teams must prioritize and deliberately consider the right brand architecture.