Predators on the prowl – protect your brand

Presently there are many companies out there of all shapes and sizes suffering from the collapse in financial markets. Some are hanging on a slim thread, conscious of the predators lurking below. These cash-rich predators realise that the companies are worth considerably less than they were a year ago, and may be worth considerably more when markets start to recover later this year. They may want to make a quick buck from on-selling when the time is right. The targets may have something valuable that is strategically important and attractive. Some may be stripped of valuable assets and then cast aside. The reasons for acquisition are manifold.

The extent and severity with which the financial collapse has affected companies now suggests that a considerable increase in company mergers and acquisitions will happen in 2009 before the markets recover. Does this suggest most activity will happen in the first half? I wonder. Those companies who were a target in 2008 while in good health and valued accordingly, are now looking over their shoulders fearing the inevitable. Some will come willingly, while some will plan for a lengthy siege, holding out for every dollar.

One factor may not change and that is the horrendous lack of merger success in Australia, with 80% often quoted as failing to recover their merger costs – one of the worst failure rates of any business activity. High level casualties such as Tata’s 2008 acquisition of Jaguar and Land Rover from Ford for $2.3 billion, being around half the figure that Ford paid several years previously, indicate the damage that can be inflicted on brands and, in this case, the tough job Tata has to restore a huge amount of brand value.

Mergers face significant risks and challenges – deciding which brand to retain, defining that brand,  integrating the businesses, rationalising the brand architecture, engaging and retaining employees and realising cost savings and synergies while creating future value that is greater than the sum of the merged parts.

Branding can contribute significantly to the success of a merger yet it rarely receives the attention it deserves. It can however become a complex and tricky situation to handle when post-merger reality hits, particularly when CEOs become obstinate and hold on to what is dear to them and resist the need to change. Of course a lot depends on whether it is a friendly acquisition or hostile takeover.

In order to steer a clear course for the new entity, CEOs and senior management must be clear on the new entity’s vision and commitment to the future, not only for the company but for all remaining staff. Rationale for brand changes must be clearly and persuasively delivered. All management and staff from the CEO down must be prepared for change. Allegiance to the retiring brand must be carefully transferred to the surviving brand. The branding exercise must be accomplished with some speed and purpose to achieve momentum and agreed integration milestones.

The vision must be encapsulated in a clear statement of brand purpose. It must identify the essential points of differentiation and their relevance to key audiences.The brand should unify employees and be a rallying cry. It must signal strength to investors and bring reassurance to customers.

Companies rarely achieve effective M&A branding without professional help. Utilising internal resources inevitably hits a brick wall when conflicting allegiances rise to the fore. With a branding consultant as an independent partner to help guide and steer companies through the merger branding process, there is significant opportunity to avoid falling into the 80% trap. These partners must be truly aligned with the businesses involved – with the decision makers and with their objectives, plans, and people – in order to manage change effectively.

It is imperative that the branding consultancy process commences before the M&A deal is completed in order to determine what each company brings to the fore and what can be used for the future.

One of the biggest questions asked in M&A scenarios is “Are the customers a more important consideration than the employees?” While initially customers would appear to be of prime concern, I recommend that employees come first. Always start on the inside first. The company may be able to withstand losing a few customers but losing a few key employees can have a devastating impact.

M&As are expensive undertakings. For many, expenses inevitably run into the millions of dollars. It would seem to make a lot of sense to at least meet with an M&A branding expert before things go too far and listen to some good sense. A few thousand dollars invested now may well save millions later, and keep you away from the 80%.

Tony Heywood is an international branding consultant and founder of Heywood Innovation in Sydney and co-founder of BrandSynergy in Singapore.

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