Post M&A Branding – Part 1 of 3 posts

That’s right a post on post-merger branding!

Hello there.This is the first of three successive posts that I am publishing in this blog. They explore re-branding issues that tend to occur when competitors merge or are subject to a takeover.


Re-branding when competitors merge

“Melding two established cultures and sets of working practices into one is notoriously difficult. It is no less difficult doing this with two brands”.


There are many articles in the media commiserating over the pitfalls associated with M&A deals and the potential for disaster. M&As are high risk business situations, which make it all the more necessary to engage professional help to guide to manage the integration process and creation of new branding.

When two entities come together the motivations behind the M&A will undoubtedly have a profound effect on the actions of directors and managers.

These actions will in turn have a direct effect on employee, customer and investor engagement with the new entity or brand.


Why would competitors merge? Two entities or brands on the same path might merge:

• to form a bigger entity
• to achieve economies of scale
• to achieve or move towards market dominance
• to remove a problem competitor
• to acquire new skill set(s) or knowledge base
• to extend or complement a product or service range
• to take advantage of geographic dispersal > supply chain > distribution outlet
• to diversify product(s) and/or enter new markets
• to acquire advanced technology or access critical IP
• to ‘own’ a part of the supply chain or distribution

The new brand has to retain or represent no less value than that of the merging brands. The new brand must leverage the assimilated Brand Equity and values and actively support the new entity moving forward.

To achieve this you will need to identify the merging entities’ previous core brand values and determine where they align, where they clash and which to embrace. Brand values are surrounded by emotional attachments. The way you manage these attachments, sensitivities and post-M&A brand objectives will dictate the reaction to, and engagement with, the new brand.

Any post-M&A brand strategy must comprehensively elevate the new brand and engage these four key audiences with it:

1. Employees 2. Customers 3. Shareholders 4. Suppliers

If the M&A is to influence these audiences and gain buy-in, then dedicated pre- and post-M&A brand communications are necessary.

Customers
Key to a successful M&A between competitors is the new entity’s ability to retain or enhance the inherent value of the merging brands throughout this period of change and evolution. Retaining key customer relationships and brand loyalties is fundamental to its financial success.

– Take care to understand the make up of both the merging brands. Look carefully at what can be retained in terms of Brand Equity, market presence, reputation and brand values. Be sure to communicate to your audiences these and any new brand components.
– Launch the new brand. Make it memorable and engaging. Focus on the new brand values. Deliver very quickly and consistently on the new brand promises. Ensure customer-facing employees are engaged with the new brand as soon as possible.
– Engage with both sets of stakeholders pre-M&A to understand the compelling aspects
of both brands and the limits of their loyalty.

Investors
Communication and PR are essential tools to build confidence in the new entity before,
during and after the M&A.

– Is the release of a significant business initiative or innovative product imminent which will consolidate the new entity’s market position irrespective of any branding changes?
– Communicate all the key benefits, advantages, vision and objectives of the M&A to the market.
– Ensure the market is informed of progress and achievements.

Employees
The impact of a M&A is profoundly felt by the employees and suppliers of the merging entities. Certainly it is common for engagement with the M&A to be at its weakest through its employees. Many M&As fail due to negative perceptions from employees who see the way forward purely as a strategy to achieve economies of scale and rationalisation.

Such a strategy is indeed often an integral part of pre-M&A thinking – to look within the new entity for duplication of skillsets, overlap of product ranges and the re-negotiation and rationalisation of supply and distribution chains.

How the M&A is perceived

Unless treated carefully, any aggressive cost cutting and rationalisation can negatively impact on the new brand, particularly if this activity is at odds with the brand’s core values. Timely, open and informative communications must be provided to employees to address any potential negativity, unrest or disillusionment with the M&A.

What is the point of bringing two entities together if the human resources assets walk out the door?


Gen X, Gen Y, and Baby Boomers and the changing employment landscape compound the challenge of brand acceptance – within every organisation there is likely to be a mix. Each group has an entirely different view on change and with their own employment proposition. You need to acknowledge this within employee-specific communications.

Counter uncertainty and fear with strong and compelling employer brand messaging. Inform them of the new brand’s intentions, what it hopes to achieve and the role they play in its success... and more specifically how it will enrich their employment experience. Inspired, motivated and loyal employeesare integral to successful companies.

Retain the key talent, skill and knowledge within the combining entities.
Retain the positive aspects of both cultures – integrate them successfully.

Post M&A brand engagement

Brand is increasingly seen as a key business asset. Defining and developing a compelling re-brand provides the opportunity to present and position the emergent brand values and the future vision.

Click the above diagram to enlarge.

Look out for Part 2 of our three part series.
Click here to subscribe to M&A Branding blog.


FREE M&A branding presentation paper
On 28 May 2008 Neil Cookson, Creative Director at Heywood Innovation, gave a presentation at the IIR Mergers & Acquisitions Strategy 2008 Conference in Sydney. The presentation paper ‘Re-branding post M&A’ outlines the key issues, considerations and procedures in post-merger branding.

A FREE copy can be downloaded here.

Mergers and acquisitions are one of the most risky business ventures

They’re a positive minefield. Take a look at the statistics. It is claimed that...

> less than half of the mergers completed during the 80s and 90s ever created real value for shareholders

> the average merger has a 50% chance of reduced productivity and/or profits

> nearly 80% of mergers don’t earn back the costs of the deals themselves

What other business activity would tolerate this lack of success? It amazes me that M&As continue to be so popular. And yet they are. Recessionary trends notwithstanding, they still keep coming. In places like Australia the resources sector has a healthy appetite for them fuelled by the accelerating demand for most things that can be extracted from a land rich in minerals. Shares of listed recruitment firms have been pummelled in recent months as job opportunities start to dry up. Likewise, the volatile equity market and tight credit experienced in recent months have threatened earnings for Australian wealth management firms and brokers. Enter stage left the cashed-up predators.


So what causes M&As to go wrong after the deal is finalised?
Let’s just say that it is a huge challenge to combine two companies, two Boards, two management teams, two brands, two cultures, two sets of employees, two future visions, two IT infrastructures, two sales teams, two marketing departments, two HR teams, two properties, two websites, two intranets, two sets of suppliers, two sets of shareholders... and so it goes on.

The inability to address the integration process is often the No.1 factor in M&A failure. And it’s an expensive one and not only in dollar terms. In the excitement and confusion of the deal-making process where million dollar fees are at stake, the brand often comes a definite second. Yet it is the most valuable asset. When all eyes are on the merger process, the brand’s value must be protected at all costs.

Brand visibility is at an all time high during the merger and can be leveraged through timely communications that influence key audiences when they are most receptive. The brand should be protected and not neglected and put to one side. It makes sense that it is considered before, during and after the deal is finalised.

Neil Cookson is Creative Director at Heywood Innovation.
He gives a presentation entitled ‘Re-branding post merger’ at the IIR Mergers & Acquisitions Strategy 2008 Conference in Sydney on 28 May.

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