We’ve spoken a lot about the role of the brand in merger and acquisition success and the prevailing brand architecture strategies following an M&A situation. With 70-90% of mergers failing to create value, this decision carries significant weight. One thing has been abundantly clear throughout – the right brand architecture approach is situational.
Many factors should be considered including the category, history, relative brand equities, go-forward plan and objective, and the deal thesis. Since there are many moving parts, Finch Brands is frequently called upon to help determine the right approach. Here is what we consider:
Brand History and Culture
In order to decide where the company is headed, we first assess the organizational and cultural factors that have led to the success of each organization. This involves extensive listening to both senior management and rank-and-file input. Active listening helps us understand historical success factors, potential cultural landmines, and the extent of the option set.
An example would be an acquired company with a particularly strong sense of self and deeply felt mission – there is extra danger in moving away completely from such a brand name (internally and externally).
To fully evaluate brand strategy options available, it is essential to assess the relative equity of each existing braand. This process includes quantitative and qualitative research with consumers and internal stakeholders to test several factors. These factors should at minimum include current brand perceptions, brand awareness, reasons for customer loyalty/attrition, and brand stretch or brand elasticity.
This process helps us understand the risks and opportunities associated with choosing what/which brand to elevate. It is likely that ‘Reverse Stronger Horse’ brand strategies – such as when First Union rebranded to Wachovia, its much smaller acquisition – spring from a sober analysis of which brand possesses higher potential equity (not just which is larger).
After reviewing the history and relative equities of all brands in the transaction, it is time to look to the future. What is the reason behind the merger? What is hoped to be gained by combining strengths? What pieces of each brand are most valuable to the joint organization? Answering these critical questions helps shed light onto which brand identity option can carry more weight as the joint organization moves forward.
An example here would be if a deal thesis is based on geographical expansion – in such a case, a legacy identity with a strong regional reference might not be the best to carry forward. Or it might make more sense to keep strong regional brands in place.
The final piece to consider is what’s happening in the market you serve. Are there fundamental changes or shifts in the category that might herald a change in brand strategy? How does the merger stand to help you better serve this category?
A shining example is the decision to launch a new brand when Bell Atlantic and GTE merged – it was clear that neither brand would effectively transition to a telecom world increasingly dominated by mobile. Thus, Verizon was born.
One other consideration is the ability to adopt a temporary branding strategy or a phased approach that enables migration over time. In some cases, this provides time and space for the right kind of process. In other cases, a brand name may hang on in a less prominent role only to eventually go away all together. Executives should understand that the brand choice is so critical that what is decisive and quick is not always right.
Considering the above factors will help leaders make well-informed decisions and (hopefully) choose the strategy that creates the most value.