2009: a flurry of merger & acquisitions about to happen?

An organisation’s brand touches its audiences in many ways emotionally and functionally. Years spent building equity in your brand and polishing the promise that it makes can rapidly disintegrate when M&A is in the wind and change scythes through your well laid plans for sector domination.

The really big challenge when undergoing an M&A is to maintain the positive perception of your brand in the hearts and minds of your customers, shareholders, employees, suppliers, analysts and more. Change can be a fickle mistress - stimulating one minute, destructive the next. Merger frenzy inevitably involves much behind-the-scenes deal making activity that distracts leaders and managers from their brand guardianship roles and causes them to neglect relationships with key stakeholders.

Constant communication throughout the M&A process is essential to ensure that stakeholders are kept up to date with developments, are aware of the reasons for the M&A and its potential benefits and risks.

A word of caution...

It is well documented that 20% of mergers fail outright and 78% fail to meet shareholder expectations. With these statistics you could well understand that many companies experience pre-nuptial nerves and harbour some doubts over the long term prospects of the exercise. Yet many plough on regardless driven by the prospect of huge gain.

Merger mistakes to avoid

> Too much focus on the deal and not enough focus on the welfare of the brands in question.

> Inability to understand and cater for people’s reaction to change.

> Acquirers believe that it is only the target brand that will require adjustment.

> Branding assistance only happens after the deal is signed off.

When brand value can account for one third of company book value and almost 10% of a company’s market cap, it makes sense to protect brand value and not underestimate it. Brand value usually has to be identified and optimised in a relatively short space of time - typically 60-90 days between the decision to sell and evaluation by equity firms and acquirers. We work with investment bankers and M&A advisers to implement brand and marketing improvements with the express objective of increasing the company’s value pre-sale.

M&A black hole effect...

If issues are to develop, they will do so in the six months immediately following the merger or acquisition deal is finalised. The usual culprits are market pessimism and resistance to brand realignments, poor communication with investors, confusion over brand loyalties, duplicated workforces, incompatible marketing and sales teams, leadership wrangles, criticism of the merger process and managers - all can easily form a black hole that sucks away the value of both brands.

The damage caused by an M&A failure can be immense and impact across all stakeholders - employees, investors, suppliers and the general public. Reputations can be severely tarnished with greed and mismanagement seen as the root cause.

Best avoid it at all costs by seeking expert help and guidance.

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