Merger or Acquisition... that is the question

The more astute companies, or those that are miraculously untouched by the global economic turmoil that we are presently experiencing, will have their minds set on growth. For many companies this is a necessity to ensure that competitors do not get the upper hand and that shareholder confidence is maintained.

The more aggressive and impatient management teams of this world tend to favour the acquisition of complementary businesses over the often slow path to growth.

What looks good on paper in accountants’ terms however, may well not look too rosy when it comes to choosing to keep one brand or the other, or create an entirely new one. This difficult choice, feared by many leaders, is inevitably left until the last moment, instead of being considered an essential component of the main battle plan.

The great danger is that devaluing the importance of the brand before, during and after the process may result in weakening two brands instead of fortifying one. Stakeholders can easily be alienated if future vision and strategy are not present. Of concern is the prospect that the two sets of customers may not embrace the perceived benefits of the combined entity and view it and its leaders with suspicion.

In order to leverage maximum benefits from the ‘deal’ for the benefit of both organisations, I recommend that as a first step several simple and relevant questions are asked by brand managers prior to the ‘deal’ to solicit responses from key players and help bring clarity and perspective to the situation.

Brands can merge in a number of ways. Which is the right one for you?

There are three main options to consider.
1/. The creation of a single ‘monolithic’ brand. This can be your present one, that of the other organisation or a completely new one that represents the combined strengths of both parties. Example: BMW.
2/. A brand that combines the names of the merged entities. Example: GlaxoSmithKline.
3/. A ‘house of brands’ where the house brands exist in their own right with no noticeable connection to the parent brand Example: Tata and its Jaguar and Land-Rover brands

In order to choose the most appropriate solution for your particular situation, you are well advised to seek the guidance of an external branding expert such as Heywood Innovation. A strong business case must be prepared with bulletproof rationale to minimise the risk of a potentially catastrophic wrong decision.


Will the merged brand be able to position itself favourably?

The aspired positioning of the new entity may well be different to that of the two merging entities. To make this shift it is necessary to determine exactly where the brands sit in the hearts and minds of both stakeholder sets – customers, employees, future job candidates, suppliers, analysts and the general public. The competence, frequency and methods by which both entities communicate with their respective stakeholders must be analysed. The gaps between the two must be measured and also the gaps between the perception of the brands internally and externally. The findings will form the basis of a strategy to differentiate the new entity and position it favourably with key audiences.


What will customers think of the merged entity?

The last thing you want to happen as a result of the merger is to lose the confidence and loyalty of customers from both entities. It makes sense that comprehesive profiling of both sets of customers is undertaken to gain a comprehensive understanding of the reasons why they became customers and why they remain so.

The methodologies that cultivate, nurture and retain customers must be compared and adjusted to suit the new entity. This will involve qualitative research and one-on-one interviews with cross sections of both customer groups. The results of this exercise will determine the optimum solution to calm customer fears, satisfy their need for information, clarify the benefits and reinforce their confidence.

How can the heritage of both parties be leveraged?

The merger activities will add a new chapter to the history of the two merging entities. It is essential that the positive aspects of this heritage are considered, and retained where necessary, to ensure their importance to customer loyalty is not lost or diminished. Heritage can positively influence customer buying decisions. Respect past histories while planning for a brave new future.

How will employees respond to the merger?

Mergers tend to be viewed initially by employees in a more negative light than a positive one. The prospect of working with new and different people, potential duplication of positions leading to retrenchments, new performance goals, new managers, new location... all come to mind before thoughts of new opportunities, potential for advancement, more job satisfaction, more pay etc.

To overcome this demands early involvement in discussions with employees before, during and after the merger process. The need for active communication with them will be at an all time high – the competency of which will contribute considerably to the success of the merger. Benefits to them, to the organisation and to shareholders must be high on the agenda.

The ultimate goal is to have employees act as brand ambassadors, to see the value in the merger and the prospect of a brighter future.

Will a new ‘look and feel’ rock the customer boat?

Customers can be very fickle creatures. They get comfortable with organisations and products they choose and on which they come to rely. Any indication of change is likely to prompt them to re-appraise the time-honoured relationship they have with you. The most obvious triggers are the news of a merger, or a change of name or logo. The visual aspects of a brand are what people tend to recall most succinctly – name, logo, symbols, images and colors. The McDonalds golden arch, the Nike ‘swoosh’ and Apple’s apple are prime examples. Changes to an organisation’s logo can cause once loyal customers to ridicule the organisation, particularly when the media get their hands on a ‘good story’ and ridicule the expense and designer rationale. The BHP Billiton ‘blobs’, the Commonwealth Bank Sao cracker and Vegemite and, in the UK, BT’s ‘prancing pervert’ are indelibly etched in the respective companies’ minds.

It is a foolhardy organisation that fails to respect the relationship customers have with these visual components of the brand. It suggests that the more evolutionary the change, the more chance you have of maintaining customer loyalty. Remember that any changes must be backed up by bulletproof rationale.

Organisations need to undertsand that it takes a qualified and experienced branding expert to navigate a safe passage for the brand(s) through the merger process and to gain support from its internal and external stakeholders.

If your organisation is at the point of considering a merger or acquisition in Australia, Singapore or the United Kingdom and you need guidance, feel free to contact me tony@heywood.com.au

Tony Heywood is a Fellow of the Design Institute of Australia, founder of Heywood Innovation in Sydney Australia and joint founder of BrandSynergy in Singapore.

View some of Heywood’s work at www.heywood.com.au