Mergers and Acquisitions Branding | Heywood Innovation

Our new blog

2010-12-14T16:43:00.000-08:00

Hello

After three years of writing for Heywood Innovation's four blogs – branding, employer branding, M&A branding and annual report - I have decided to combine them all into one 'visual' blog that celebrates a new affiliation with our good friends the Taylor & Taylor creative team in Melbourne, and the sensational strategic and creative work that is driving our growth into 2011. The blog features work our teams are producing in the Sydney, Melbourne, London and Birmingham markets. Our new HITT blog can be accessed here.

Best regards

Tony Heywood

Will our new name fit on our letterhead?

2010-07-25T06:23:00.000-07:00

PricewaterhouseCoopers is a pretty big firm. In fact it’s the biggest of the Big 4 audit firms in the world (or it was the last time I looked). And it also has one of the least creative names in that sector or, in fact, any sector... and the longest.

It was formed in 1998 by the merger of two large firms, Price Waterhouse and Coopers & Lybrand. Both firms have a long history dating back to the nineteenth century. So did it get just too hard back in 1998 to think of a brand new name? ... or a new brand name? Was it a bad year for creativity? Were the naming firms on holiday? Were both firms so precious about their names and heritage that they just wouldn’t give them up no matter what?

It turns out that in 1989 Price Waterhouse and Arthur Andersen had discussed a merger to explore economies of scale. So we may have ended up with PricewaterhouseArthur or even PricewaterhouseAndersen. Luckily Price Waterhouse didn’t merge and avoided getting tainted by the Enron disaster.

But wait there’s more. Coopers & Lybrand was the result of a merger in 1957 between Cooper Brothers & Co; Lybrand, Ross Bros & Montgomery and a Canadian firm McDonald, Currie and Co.

Hey it could have been RossbrosmontgomerymcdonaldCurrieCo! How would that have looked on the letterhead? Pity the poor receptionist... “Good morning this RossbrosmontgomerymcdonaldCurrieCo, can I help you?

I guess it would have been a disaster if it had an office in a certain small village in north west Wales... “Ello boyo this is RossbrosmontgomerymcdonaldCurrieCo’s Llanfairpwllgwyngyllgogerychwyrndrobwllllantysiliogogogoch office... can I ’elp you?

Tony Heywood is a Fellow of the Design Institute of Australia, founder of Heywood Innovation in Sydney and London with affiliates in Melbourne, Gold Coast, Singapore and Mumbai.

Brands off the agenda again

2010-07-20T05:42:00.000-07:00

Australian companies are once again on the hunt for...

– tasty acquisitions now the war chest has been replenished, or
– mergers with like minded businesses intent on the 'bigger is better' model.

They're looking for acquisitions that can fast track new growth in recovering markets. Sadly we're not seeing much evidence that brand is being considered as part of

a/. the due-diligence processes preceding negotiations or
b/. the integration activities that follow a merger

They're paying big bucks to expensive advisors to get the deal across the line. Why don't they invest some money and time making sure those valuable brands and the people attached to them are going to survive the journey?

Enter marketing department stage left. The good old 'we can do it all' marketing team are once again thrown headlong into the fray to manage the brand through the latter stages of the merger or acquisition, usually when it's too late, usually headed by people with little experience or little desire to be dragged away from their new designs for a multi-page pop-up direct mail piece.

Without a doubt customer brand allegiances influence M&A deals. Tamper with them at your peril. Customer and employee perceptions of the brands play a huge role in determining the smooth transition of the deal and the ultimate viability of your post-deal branding strategy. Ask them about it before it's too late.

Surely acquirers would have done their branding homework before approaching the target? Surely they would have included robust research to determine brand value and the true drivers of brand equity. Did they look beyond this to determine what role the brands might play in driving long-term business outcomes and the ultimate success of the deal?

I hope so!

Tony Heywood is a Fellow of the Design Institute of Australia, founder of Heywood Innovation in Sydney and London with affiliates in Melbourne, Gold Coast, Singapore and Mumbai.

The odds are 1 in 5 that your M&A will succeed! You want to question that?

2010-03-21T19:20:00.000-07:00

One important question that tends to be asked by listed companies in a M&A scenario is – “will the M&A enhance shareholder value?” Well, will it? This however is only one of many questions with which you will be faced in the journey to M&A.

Surely this is the primary goal of any listed company? But how is it measured, when many companies are sceptical of measurement methodologies and the integrity and accuracy of the results? It is reasonable to hope that most M&As will result in an instant raising of the company’s share price, and that company boards, rightly or wrongly, will use this simple indicator as a measure of success. But is this rise simply a short term moment of excitement? Surely the long term impact is a more important measure of the potential and ultimate sustainability of the newly formed entity? Will the two sets of shareholders see the upside potential or wallow in confusion as the two brands come together. Harmony or conflict?

Will the new entity gain new market share or even market domination? Will it become the new leader in the market segment? Will your M&A master the science of 1 + 1 = 3 or, as happens in 80% of cases, fail its elementary maths lesson with 1 + 1 = less than 2, or even 1 + 1 = 0 and never graduate from branding university?

Will the post-merger period be a reactive minefield or proactive where synergies are aligned with the pre-merger planning? The path to successful integration requires two approaches – internal and external.

Are the two brands compatible? Will they operate in perfect harmony surrounded by a warm shareholder glow, or fight tooth and nail to protect their interests fuelled by employee and customer concerns? How much brand-related groundwork was commissioned before the M&A was seriously considered?

Internal
Will the newly formed rock band Culture Clash raise its collective voice? Are the two sets of employees compatible? Are they moulded by a strong allegiance to their present employer’s culture and about to feel deceived by the obligation to transition to a totally different or compromise one?

External
What are the marketplace perceptions of the M&A? What exactly have you told your shareholders and customers about all this? Will they believe your predictions of success and compatibility? Have you told them what the new brand model will be – one brand, two brands or new brand – and why?

Will you adopt the brand of the acquirer, because it is the market leader and you want to consolidate its position and possibly remove the competition?
Will you combine the two brands? Are they equals in regards to similar market presence, reach and brand equity? Or is it simply that you can’t decide which one?
Is it preferable to adopt the formula a + b = c where a new combined entity with a new name and identity is born?

How will you fare in the transition? Will your organisational capabilities integrate? Will the employees, resources and brands do likewise?

Time to call in the branding/integration/compatibility coach.

Tony Heywood is a Sydney-based brand guidance counsellor, founder of Heywood Innovation in Sydney Australia with affiliates in Melbourne, Gold Coast, London, Singapore and Mumbai.

State of Play in M&A

2010-01-21T19:40:00.000-08:00

There is no disputing the fact that in Q1 2010 we are still in a low growth environment. A new Ernst & Young report reveals that 49% of Australian companies believe this may continue for another 12 or 24 months. This is prompting renewed interest in acquisitions as a means to secure market share, as businesses see little growth potential in the recovering markets.

Highlights of the report include:

29% of Australian companies are likely or highly likely to acquire other companies in the next six months.
80% of companies expect consolidation in their industries over the next 12 months
36% rate the M&A outlook as very favourable
41% would like to use potential opportunities for inorganic groth over the next six months
3% of companies are presently focused on survival
46% of companies are ‘very well positioned’ to make a quick acquisition within 30 days notice

It would appear that in Q1 2010 Australian M&A activity is back on the agenda. Obviously the less well capitalised companies will become targets. In a low growth environment companies using acquisitions to get ahead will perform better than those relying only on a market return.

I am hoping that executive boards will place more emphasis on effective integration of company brands pre- and post-acquisition and will allocate funds accordingly to seek external help and reduce the risk of failure – which remains at around 20% for all mergers. The big distractions of 2008/09 did little to improve investment in M&A branding.

So which sectors will experience the most M&A activity moving forward? According to the latest semi-annual survey of 921 investment professsonals by the Association for Corporate Growth (www.acg.org) and Thomson Reuters...

23% of respondents named the healthcare/life life sciences as the most active area for merger activity in Q1-2 2010.
closely following this is manufacturing and distribution - 18%, and financial services - 14%.

It also revealed that...

94% believe strategic investments will accelerate in the first half of 2010
54% are actively pursuing distressed companies
48% expect more than one in four deals to be with distressed companies in the first half of 2010
34% identified manufacturing and distribution as the best opportunity for distressed investing
in November 2009 there was a drop of 33% in announced deals compared to November 2008
87% describe the Q4 2009 M&A environment as fair or poor
82% expect an increase in merger activity over the next six months
80% expect to pay no more than five times EBITDA for acquisitions over the next six months
37% identify the main M&A obstacle as the gap between the price at which a company is willing to sell and the price a buyer is willing to pay

Valuations will not return in any great hurry to what they were pre-downturn. Buyers realise this and are patiently awaiting sellers to come to grips with the new valuation structure and be more realistic.

Perhaps only then will M&A activity start to surge?

Tony Heywood is a Sydney-based brand guidance counsellor, founder of Heywood Innovation in Sydney Australia with affiliates in Melbourne, Gold Coast, London, Singapore and Mumbai.

Your company is considering a merger or acquisition

2009-11-05T21:14:00.000-08:00

You’ve explored the financial and legal ramifications. But do you know what will happen to your brand – will it flourish or die a death shortly thereafter?

Why do mergers and acquisitions take place?

They are serious business decisions based on expanding geographically to enter new markets, diversifying your product or services range or simply having a desire to grow and leverage your brand. There are many associated legal and financial issues which frequently divert attention from managing the brand, making your M&A efforts vulnerable to failure and preventing you from leveraging the full value of the surviving post-merger brand(s).

What are the implications of neglecting your brand during the M&A process?

> Management and staff send mixed messages, creating confusion among customers
> Customers lose confidence and look elsewhere
> Competitors steal your customers
> Employee engagement suffers leading to talent loss
> The brand loses market value
> Share price drops

Why does this happen?

> Companies fail to commission professional help
> Addressing the role of the brand is ignored or happens too late in the process
> Company executives are too distracted
> Deal makers are only focused on getting the deal across the line

Most companies in M&A scenarios do not have the internal resources nor expertise to manage the brand at this critical point in time. It’s all about making the process easier and optimising the potential for the brand(s) to emerge stronger when the M&A is completed. The ultimate test is maintaining loyalty from customers, shareholders, employees and the public.

A robust and well considered brand management strategy will ensure that your business can withstand the M&A challenges. Working with an experienced brand management team can help you assess and manage the challenges based on experience and application of best practice methodologies.

Remember that the pre-planning stage is just as important as the M&A announcement and post-announcement stages.

What we can achieve for you:

> Create and manage all M&A-related communications – both internal and external.
> Ensure that all employees have a clear understanding of what is planned before, during and after the M&A.
> Understand your business and determine the post M&A potential.
> Develop a ‘masterplan’ brand strategy to determine what is achievable with the merged brands and how to extract maximum value.
> Identify the strengths, weaknesses and opportunities associated with each brand and assessing their impact on the ‘new’ entity, stakeholders and business in general.
> Determine whether the new brand is relevant to present and future customers.
> Help you decide whether to maintain only the present brand, adopt both brands or create a new brand – there are obvious cost implications attached to this decision.
> Establish brand guidelines to help employees understand, manage and communicate the new brand. > Develop a strategy and procedures for merging the two cultures.

So what are the benefits?

> Reduced risk of M&A failure
> Successful integration of two companies, cultures and brands
> Increased brand value
> Reduced brand management costs
> Increased stakeholder loyalty
> Enhanced employee and job candidate confidence in the company
> Higher profits

Companies who fail to address the branding aspect of their M&A activities are likely to severely hamper their chances of success.

Tony Heywood is a Sydney-based brand guidance counsellor, founder of Heywood Innovation in Australia, United Kingdom and India, and joint founder of BrandSynergy in Singapore.

2009-10-15T20:30:00.000-07:00

Well, it looks like the media and a few well intentioned politicians are blowing the trumpet of economic recovery. Interest rates are going up soon we’re told, so I suppose it must be true that things are all well again. Companies have just been through the capital raisings stage and are now about to enter into a frenzy of M&A activity, or so we’re told.

Looking back on the last 12 months of financial trouble and strife, it remains a mystery to ordinary folk like me how these things happen. This was recently summed up most wonderfully by one of the Australian Financial Review’s better writers Peter Ruehl.

‘Those of us with minor to moderate intelligence are still trying to figure out how we lost so much money while we were just sitting around having a few beers. Not only will we never get it all back; we’ll have to pay the government for the money it borrowed to cash up the people who lost it for us in the first place...
Then you realise it means using money nobody’s actually earned yet in an attempt to reverse a situation caused by people using money that was also never earned – and didn’t really exist to begin with’.

Magic.

Tony Heywood is a Sydney-based brand guidance counsellor, founder of Heywood Innovation in Australia, United Kingdom and India, and joint founder of BrandSynergy in Singapore.

Branding consultants make great marriage guidance counsellors

2009-09-13T18:21:00.000-07:00

So the two love birds have plighted their corporate troth. The bride cares not one whit for her loss of name and even less so for her loss of virginity in the matrimonial stakes. What a reception. The bride and groom are looking resplendent in their new livery. Thompson Epicyclics and Robinson Ratchets are now merged into a new darling of the stock market - Episylinus. Or so they think. The corporate advisors seemed pretty happy with things during the pre-nuptials, but now they seem noticeably absent (in the south of France). Your HR director has just informed you that there have been a few senior management resignations in the past few days, but that was to be expected. What can possibly go wrong?

Those branding consultants have been knocking on the door for a few months now – trying to get their hands on a new logo commission no doubt. They even managed to push a piece of paper under the CEO’s door. Its tone seemed a little sombre and not in the spirit of the moment. It warned of dire consequences if a strategic approach to post merger branding was not addressed and a competent communications program put in place. “That’s a marketing function isn’t it? Just as if the Board needs another admin consideration to distract them right now! ” announces one of the directors in passing. Your PA gives a discreet cough as she peers round your office door “I thought I’d better inform you... there appears to have been an alarming drop in our share price today”. The consultant’s note painted a dark picture:

> brand equity will suffer
> customers will be confused
> competitors will steal them
> employees will fear for their jobs
> analysts will see the writing on the wall
... and the share price will drop

Somewhere in the distance a bell started to ring.

In the note those ‘branding people’ also quoted some sobering merger statistics:

> 70 percent of merger objectives go unrealised – Booz-Allen & Hamilton
> Productivity drops off 50 percent overall in the first 4-8 months and only 23% earn their cost of capital – CFO Magazine
> Revenue drops in the first three quarters after a merger – McKinsey Consulting
> Merger failure is not a western phenomenon – this year, only a third of the mergers and acquisitions by Chinese companies were considered successful – China Council for the Promotion of International Trade

In these recovering markets, cashed up companies are scrutinising competitors which are low on funding and strategically positioned for growth. Low acquisition price and elimination of a previously troublesome competitor can be compulsive drivers that corporate advisers are once again excited by. Who needs incremental and cautious growth steps when you can make one giant leap for mankind, or at least for your own business (and ego)?

Building a business is not easy. Tell me about it. It’s difficult enough to put together from scratch (and hold together) a talented team, build a culture of excellence and apply leading edge technologies and processes. Try and do this with two existing groups who may have been sworn enemies, who have their own beliefs, values, ways of doing things and their own unshakeable view of the future and how to get there... and you may just have yourself a few challenges, which may just cast some doubt on your own future.

So you’ve probably now got two of everything. And this tends to be expensive. You reach into the cupboard and dust off your grip reaper outfit. Cost cutting looms large. Who goes and who stays? Swoosh goes the scythe. Do we need two brands? Of course not. Swoosh goes the scythe again. Branding consultants. Definitely not. Swoosh. Feels good doesn’t it? Corporate cleansing. Your PA hands you an impressive looking document with the new Episylinus logo emblazoned on its cover. The inside pages are manna from heaven. “Look at the money we just saved”. Back into the cupboard goes the outfit. Out with the Armani. You have yourself some analyst presentations to give.

Those branding consultants just won’t give up – another letter lands on your desk. They’re telling me time’s running out. It is quickly consigned to the bin. A pity, as the crumpled piece of paper asked some pertinent questions:

> do your people clearly understand whether this is a merger or an acquisition? – sounds silly, but get this one wrong and you may have a lot of explaining to do.
> do you really know who your new partner is – did it come out in the due diligence – have you met with them yet?
> you did do a SWOT on their company and yours didn’t you?
> did you confirm what the new brand promises to customers, shareholders and employees – and whether you can keep that promise?
> is the merger the only growth you’re likely to experience? – if so, you’d better invest in some organic growth fertiliser.
> are you focused on how customers are going to react? – yes, both sets!
> are you ploughing ahead doing it all your own way or consulting with ‘the other party’?
> how are you going to judge merger success? – new sales, profitability, growth, employee retention or a slap on the back from fellow directors?
> you’ve decided on the name and identity of the ‘new’ entity haven’t you?
> is your brand implementation team working to a plan? – if so, are you aware of it?
> is your senior team fully briefed on and motivated by the changes? – do any of them have doubts they haven’t shared with you?
> what changes are necessary to your marketing and communication activities? – are the relevant teams on top of all this?
> did you thoroughly test and register the new name(s)?
> who’s in charge of rallying the troops and telling them about the brave new future? – I guess it must be you!
> did anyone remember to tell the PR company what an important job they have to perform?
> are your employees as engaged and raring to go to the same degree as before the merger? If not, why not?

So what are you going to get out of all this hard work? You could probably...

> gain loyalty – from those really important people – customers, shareholders and employees
> integrate into one success story two companies, two cultures, two brands and two sets of employees
> drive new cost efficiencies
> motivate your workforce like never before
> enhance your bottom line
> write your name in the history books
> stay away from the divorce courts

Tony Heywood is a Sydney-based brand guidance counsellor, founder of Heywood Innovation in Australia, United Kingdom and India, and joint founder of BrandSynergy in Singapore.

Post-merger kerbside damage – more than your paintwork can get scratched

2009-07-23T20:54:00.000-07:00

Some of the most monumental post-M&A disasters have happened in the car industry. One that comprehensively undermined reputation and brand value was the takeover of Bentley by Rolls-Royce in 1931 as a result of the company’s finances collapsing courtesy of the Great Depression. Where’ve we heard all this before GM and Chrysler?

Up until this point Bentley cars were positioned as the epitome of exclusive and expensive luxury cars which achieved a sporting heritage that comprehensively shaded the racing ambitions of the Germans and Italians. Following so shortly after the emergence of the company’s first production car in 1921, the Le Mans victories of 1924, and 1927-1930, notably with the legendary Speed Six, secured the Bentley name in the annals of motor sport history.

Up until its takeover by Volkswagen in 1998, Bentley’s sporting ambitions went out of the window, no doubt influenced by Depression-era cutbacks, and under the marque’s new owner Bentley cars became little more than rebadged Rolls Royce luxury saloons with a less distinctive radiator grille. Sporting heritage seemingly meant very little to the board of Rolls- Royce whose singular ambition was to build the best car in the world – and that meant a luxury saloon or limousine, not a sports car. Volkswagen had different ideas. The current model Bentley Continental GTC Speed released in 2003 and capable of 202 mph, has arguably bestowed on the Bentley brand the title of ‘maker of the world’s best high performance luxury car’. The 6.0 litre, twin-turbocharged W12 engine, producing 552 hp (412 kW) has come a long way since the legendary 84 mph Speed Sixes.

Under more visionary and more financially stable ownership, the Bentley brand has now regained the sporting ambitions it began with 80+ years ago. The purchaser of a new £153,000 Bentley Continental GTC is buying it for the perception it creates of the high speed luxury sports grand tourer. The buyer of a T1 Bentley saloon back in 1966 would have other reasons... quite possibly viewing it as a (slightly) less expensive way to fool the neighbours that you had hit the big time in the luxury saloon car stakes.

It took Bentley 72 years to regain its rightful brand status. How long will it take Chrysler’s new owner Fiat to return the brand to its former glory, to cast aside the negative perceptions that have all but destroyed its credibility in recent years and return it to the former glory days where innovation and style were paramount?

Let’s hope it won’t take until 2081.

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.

New name for your merging company sir? No problem. We’ll have one in the morning for you.

2009-07-16T16:42:00.000-07:00

... as soon as the marketing team has opened a nice bottle of red wine, rolled up their sleeves, told their partners they’re going to be an hour or two late coming home tonight, got the dictionary and thesaurus out and sent out an invitation to that brainy girl from the typing pool who did Latin at university in the UK. Names are easy to conjure up aren’t they? Especially when the bosses of the two merging companies have finished their pre-celebration lunch and suddenly realised that they haven’t got a name for the ‘new entity’ and need it the following day.

Organisations have widely differing views on the value of names. Some company leaders think their marketing team can dream one up overnight. Other global brand leaders will happily invest tens of thousands of dollars creating a name and, over several months, engaging extensive testing to ensure its uniqueness, cultural appropriateness, multi lingual potential and ability to be registered around the globe. And it’s the same when it comes to creating a new identity for the merged entity. Some leaders think it just needs a new logo to replace the two old ones. “Get one from the marketing team, and tell them I want some decent colours, and I want it tomorrow to show the Board”.

For the ‘overnight name’ brigade, reality comes home when someone points out, usually rather late in the piece, that:

> the name is rather similar to another in their industry
> the URL is not available
> the lawyer cannot register it in ‘the other country where we operate’
> the Board thinks it bears a resemblance to a certain brand of dog food
> the bright young accounting graduate from Barcelona thinks that in translation it suggests some form of genital mutilation in Spanish
> the CEO’s wife doesn’t like it
> the CEO’s teenage son came up with something better

Such things are best left up to the experts. There are time honoured procedures that must be followed. Strangely enough it does help if your have some intellectual prowess guiding the process. Fancy name generation software is usually only useful to tell you what not to recommend. Consulting with an Oxford University Latin scholar can be a good start, but names like mensarum, dominus and castrati don’t always sit comfortably. Greek anyone? As you would expect, there have been plenty of blunders over the years – see my March 27 2008 blog post.

In the case of a merger two sets of decision makers can complicate matters especially if you’re not already past the “let’s use our logo because it’s better than yours” phase in the merger discussions. Consult an external expert... you know it makes sense. Would you change your own TV aerial?

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.

PS
Even couples celebrating their new addition to the family could take some advice. Years ago I remember meeting the daughter of Mr and Mrs Rainey from Texas. Struggling a little to comprehend the heavy Texas drawl, I thought she was introduced to me as Wendy. On later inspection in correspondence, I noticed her name was spelled Windy. Oh dear.

Common misconceptions and errors in post merger branding

2009-06-23T07:24:00.000-07:00

Fuzzy short-term focus
How will additional brand value be created after the deal is done? How will the synergistic leveraging, repositioning, cost reductions, new territories, plant, products and resources balance out against employee disengagement, challenged loyalties, diminishing morale, scared suppliers, customer confusion, clashing visions, workforce duplications, IT systems that won’t talk to each other, payroll systems that are worlds apart, language challenges, distressed designers, boardroom clashes over brand relevance, stalled communications and too many people doing the same jobs?

Brand value... what goes up must come down... sometimes faster than you think
Brand value fluctuates. Its value pre-merger can bear little resemblance to its value post-merger. Customers may react adversely to the merger, so might employees, shareholders, suppliers, the media, general public, unions and general public. So might the contract staff cleaning the bathrooms. Not to mention the analysts who are looking for a field day. The tidy sum you paid the brand valuation company pre-merger to value your brand is short lived currency. It doesn’t last long. Particularly if you then go through a merger. Guess what? You need to spend it all over again post-merger to confirm to what degree brand value has fallen (or occasionally might have risen).

It’s how you use it (not how big it is)
If you are a company which is on the acquirer’s radar, of course you are going to do your darnedest to up its value by whipping your sales team into a frenzy, optimising internal systems, cranking up the PR machine, whispering sweet nothings to your shareholders, paying your designers a pittance for a spanking new logo, kissing your customers’ rear anatomy and reinforcing your commitment to disadvantaged folk, lame animals and the environment. It’s then all up to the acquirer to maintain this level of activity, determination and communication, or the whole thing will start to slow down and brand value will slide slowly but surely out the window and a big future write-down becomes inevitable.

Learn from the mistakes of others
More has been written about M&A disasters than any other topic on the planet. Just Google it to find out. How can you ignore the fact that more than a third of executives around the world who’ve been involved in major deals ’fess up that circumstances got the better of them. In the heat of the moment they got too caught up in the merger bidding/deal making process to put on their responsible hat and perform that ever so necessary due diligence on the past, present and future value and potential of the brands. Do you really want to end up starring with Bruce Willis in a brand disaster movie? Do the right thing. Come audition with me instead. You know my number. I promise I’ll whisper some sweet branding advice in your ear but I’ll stop short of the casting couch, unless you’re Claudia Schiffer hell bent on merging interests.

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.

M&A confusion

2009-06-11T21:50:00.000-07:00

A significant grey area is often encountered in merger deals where all focus is centred on the numbers while on the distant periphery lies intangible stuff like company reputation – an essential component of successful brands. Post merger failures frequently cite minimal discussion on brand planning and a distinct lack of strategic brand thinking in the lead up to the merger. There seems to be an inbuilt reluctance by deal makers to wheel in the branding experts until after the deal is done, the excitement has died away and a new reality sets in. Usually too late.

Brand mergers are frequently haphazard and unplanned. In the heat of the moment deal makers only see the potential for short-term financial gain which is often driven by personal agendas that inevitably lead to short term success and long term failure.

The full potential of mergers is rarely harnessed. A lack of pre-planning is usually the culprit. Mismatches or simple poor management of the resulting brand(s) often impact badly on customer and investor expectations and realise the worst fears in disengaged employees. Sadly many post-merger brands end up having a lower value than before the merger.

The path to M&A success is frequently seen as a risky and treacherous one and only for the brave at heart.

Here’s some simple and effective advice.

Communicate the merger benefits as soon as possible
Let customers, employees and investors know all the great stuff that the M&A can deliver. Win their support and make them feel part of the action, that their involvement is crucial to the future wellbeing of the brand.

Corporate reputation
Don’t just focus on the ‘hard’ assets resulting from the merger. Include the intangibles that contribute to brand value such as corporate and employer reputation.

Look for ‘deal makers’
Identify factors that will enhance the chances of success after the merger, such as the strategic use of the corporate brand, methods to deliver greater value post-merger to customers and how new market segments can be opened up.

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.

HR must make EB work well in an M&A. OK?

2009-04-01T15:46:00.000-07:00

Employer Branding (EB) is one of the most critical factors in M&A success. In fact it’s probably stopped quite a few deals going down the toilet. Although M&As are not the flavour of the month right now, as vultures lay wasted by the roadside licking their wounds, there is talk in dark corners of corporate hallways that bargains will be grabbed later in the year. And it may be overseas buyers doing the grabbing, taking advantage of the declining Australian dollar.

The days of the ‘she’ll be alright with the bank and shareholders’ attitude to M&A deals are long gone, the likes of which will probably never be seen ever again. Deals will be much more closely scrutinised. Protection from downside risk and market fluctuations and huge demands on financial performance will place people issues firmly on the map as a critical consideration. In fact it is becoming increasingly recognised by Boards that an organisation’s ability to integrate people and cultures in M&A scenarios is a prerequisite to success and its ability to realise maximum value from the deal.

So what does all this mean? It means that there is much pressure on HR Directors and Managers to be ‘on the ball’ and totally ‘au fait’ with all things relating to change, branding and employer branding before, during and after the deal is done. This is a big call, requiring much knowledge and insight, which HR departments are not always resourced to handle. They must also be able to articulate the benefits of the deal to their people and pre-empt all the people-related issues that will inevitably arise. And this must be accomplished as early as possible before simple uncertainty builds into complex issues.

HR must work closely with the deal planners and brokers to understand what the real objectives of the deal are and how it affects both sets of employees. How will the integration of two cultures be handled and how will it affect employees? What will be the main issues identified by employees that may slow down or destroy the deal – pay, roles, leadership, training, promotion?

These are key factors in an organisation’s ability to maintain engagement and productivity and retain top talent.

Not all issues will arise before or during the deal making process. Many can arise after the event and can catch out the unwary – issues such as inequities in salary levels, reluctance to relocate and rising attrition.

My advice centres around HR adopting a proactive people management approach and relying on a tried and tested employer branding process – like my own company’s EmployerbrandGuidanceSystem – to build one cohesive and believable employer brand that can move forward the merged organisation and its people.

HR must be prepared to work with the deal makers to add value by applying effective people management, integration, communication and retention strategies that provide a clear path forward geared for long term success.

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.

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

2009-03-12T23:32:00.000-07:00

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.

M&A DEALS TO RISE IN 2009

2009-02-19T22:19:00.000-08:00

When companies struggle in a downturn and their value plummets, it is inevitable that bargain hunters will be there doing their sums. Cashed up companies looking to grow quickly, increase market share or take out the competition are in a holding pattern waiting to pounce. The barriers encountered last year that scuppered mergers and acquisitions – plunging markets, volatility, uncertainty and high valuations – are no more. Change has scythed through these restraints and opened up opportunities rarely encountered in the healthy markets of the last few years.

When there’s M&A activity in the air, which I predict there will be in late 2009 in big numbers, it is inevitable that it will also create uncertainty if not downright panic among employees. We will witness competition among them to be best positioned on the ‘value to the company’ scale for when the crunch comes and change singles out the weakest and the best. Recruiters will receive many enquiries. Promotion plans will be temporarily shelved. The inevitability of duplicated roles will cause restless nights. Mortgages, car repayments and school fees spring to mind. Family holidays move off the radar. Commercial real estate agents venture a call.

The concept that people are crucial to the success of M&As and ultimate brand value has not exactly been respected and managed too well in the last few years. And there are plenty of examples I can quote for you. I believe this will now change in these stressed times, as companies wrestle with the pressing need for greater efficiency and ‘bang for buck’ from expert consultants.

Most employees on average will be subject to two or three mergers or acquisitions in their working lifetime, and as a result will experience the emotional ups and downs of uncertainty, stress, lethargy, extreme camaraderie, isolation and many others. Although the popular press and the more prominent business consultancies will tell you that M&A processes have been cleaned up a lot of late, it has not been my experience, and certainly not at medium-size enterprise level.

There are cases where employees first hear about an M&A affecting their company by reading about it in the press. Timing and open communication therefore are very important.

The much quoted statistics of rampant M&A failure caused by greed and the inability to manage brands can be so easily repeated in this ‘mid-recession era’ we find ourselves in. These statistics will continue however, unless the companies involved and their respective advisers make a more determined effort to understand how brands work and the role they play in M&A success.

Employer brands in particular have been misunderstood and ignored in too many cases. I would like to think that company advisers in particular now recognise the important roles employer branding and communication play and the necessary investment in time, effort and dollars to make it work and help protect the deal and make a better company.

Remember this – people make M&As work and it is people who make better companies.

Who do you want to protect most in an M&A – customers, investors, employees or suppliers?

I’d recommend you start on the inside, because the inside affects everything on the outside. Once you have the inside fixed there’s a much better chance of success with your external audiences.

Human capital risks therefore are the most important... but they can be the most difficult to manage, particularly when emotions are high, when change happens, when retrenchments begin, job roles change and new working conditions are inevitable. Trying to integrate two cultures is one of the hardest jobs and will inevitably lead to natural attrition regardless of how well the process is handled. The more you invest in employer branding, the less likely this will be the case.

If you are faced with organising or managing an imminent M&A, I strongly recommend you read about our employer branding workshops – February in Sydney and March in Singapore.

So where does this leave the branding consultant? It sounds like he/she, apart from being able to advise on M&A corporate branding issues and related communications, has to also be an employer branding consultant. Now I wonder where you can find one of those in the Sydney, Singapore or Mumbai area?

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.

Predators on the prowl – protect your brand

2009-01-20T15:08:00.000-08:00

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

Mergers come out of the closet

2008-12-18T20:39:00.001-08:00

In the heady days of cheap and plentiful finance and relaxed governance, before the US-driven collapse of financial markets set in, there were a considerable number of companies looking to float, raise capital and merge.

Where did they all go? As you would expect, when reality hit the fan many of these thought twice about such brave moves, and hid their plans in the back of a deep cupboard drawer labelled ‘Field of Dreams (pending)’.

The thought of floating, falling from grace and bearing the collective brunt of the investor agitatus species did not appeal. Remember that this is a species that, once deprived of its staple dividend feed, is characteristically known for its long term memory capacity, piercing stare and sharp tongue.

Failed capital raisings are less of a risk in the long term damage stakes, incurring only temporary embarassment when the money doesn’t appear in the amounts hoped for, but which may extend to demotion or removal from the Board depending on the level of shareholder angst.

Mergers are a little bit different. In the good times, having done the sums and the long hours in the boardroom and on the golf course, merger plans were hatched and the adrenalin flowed at the prospect of growth, enhanced positioning and market domination, where all competitors were freely offered a reversed Churchillian salute.

That was then. A new reality has now set in. So what happened to all those brave merger plans and brave captains of industry? Well, some plans were shelved but plenty remain in a holding pattern waiting for the financial barometer to shift from CHANGE to FAIR before they once again prepare for take off fuelled by renewed vigour, determination and a modicum of greed.

Many targets remain targets. Some are even more of a target now. Unwilling targets may now be less so, as their value plummets. With a lower price tag they may look even more attractive. Bargain basement opportunities may look too risky depending on the industry sector in which they reside.

All good stuff this, but what does it all mean? It means that once the barometer does shift and media barons raise their thumb in symbolic gesture sometime later in 2009, it will be safe to once more venture out into the sunlight beyond the dark shadows cast by the pillars of the Big Four and timely to buy back the Porsche and worship the Big Deal once more.

Branding consultants like myself will, with renewed enthusiasm, rattle cages and preach the gospel on good brand sense and the important contribution it makes to merger success. Will the deal makers listen? This is the question. In 2009 I think they will, because people learn from mistakes don’t they?

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

M&A in a ‘holding pattern’? Now is the time to get your head around the branding implications.

2008-11-09T19:59:00.000-08:00

As a result of the global downturn, a considerable number of planned M&As have been put into a ‘formation holding pattern’ pending market recovery. Some have since been permanently shelved, but many are still out there cowering below decks with the hatches battened down, waiting for calmer waters and the chance to fly the flag and sail forth.

While the timing to resurrect interest in M&A deals is at present very much a crystal ball gazing exercise, potential merger partners would do well to take the time to focus on the frequently ignored branding requirements of the merger. After all, your M&A is all about creating future value for the merged entity – value that is greater than that of the merging parties combined – value that is very dependent on your brand’s strength and ability to adapt to change. Yet it is taking decades of miserable M&A performance for the penny to drop and corporate motivation to be balanced with brand motivation.

The lack of success in M&A deals is staggering – McKinsey and Company state that 80% of mergers fail to earn back the cost of the deals. Where else in business would such low performance be tolerated? Arrogance and emotions are contributing factors to the failures, difficulties in agreeing on a name to take the new entity forward and concerns from employees on the viability and longevity of the ‘deal’. It is understandable that company owners can be highly protective of their prized possession which diverts them from making sensible and objective decisions.

The surviving name is a critically important consideration, particularly to satisfy investors, business partners, regulators, clients, employees and suppliers – a not insubstantial and critical audience! There are many other considerations that relate to the brand. How do you ensure that you don’t rock the client boat and lose their confidence? How do you communicate solid rationale for your decision not only for the name but for the way you intend to navigate the brand forward? What’s the new vision? How are you going to handle two sets of values, two sets of customers and two sets of employees? How are you keeping customers and employees informed while the process unfolds? What if the brand architecture needs to be modified or rationalised, particularly where there are complex group structures and subsidiary businesses, particularly where they reside in more than one country?

Our experience at Heywood Innovation is that employee disengagement can easily cause the merger to founder. Inadequate communication on merger rationale and progress, absent leadership, lack of focus and vision for a brave new future, and inconclusive discussion and agreement on new goals can all conspire to reduce the deal’s potential for success.

The CEO and management team must be highly visible as the champions of the new brand before, during and after the deal is cemented. The brand should be portrayed as a symbol of unity and an opportunity for employees, a reaffirmation of market strength for investors and an emotional re-charge for customers.

The fact that many M&As have been put on hold will only serve to dilute confidence. When markets recover, the decision to press ahead must be accomplished with great conviction and confidence. Now is your chance to give serious consideration to the branding implications before the storm subsides, money starts to flow and M&As once again become the flavour of the month.

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

Post M&A Branding – Part 3 of 3 posts

2008-09-30T00:23:00.000-07:00

Deciding which brand to absorb in the M&A
To get the M&A deal across the line requires significant investment. Attention then turns to rationalisation and new cost efficiencies. What rarely happens in these post-M&A stages is pro-active investment in a branding and communication strategy.

To harness the new brand’s full potential you need to engage an integrated branding and communication methodology which justifies and promotes the new brand.

To optimise the chances of success and to minimise risk, the brand methodology must encompass the key components of:
Discovery
Future vision
Name generation
Definition
Expression
Communications
Delivery
Engagement
Monitoring

There are four strategic sets of communications to consider:
1. External and product brand communications
2. Shareholder communications
3. Employment branding and employee communications
4. Internal brand engagement and change management communications

Must do branding activities pre-and post-M&A
1. Appoint competent brand professionals pre-M&A. Build an ongoing relationship with them and be receptive to their recommendations.
2. Consider branding, internal communications and marketing as essential to the success of the M&A process.
3. Allocate a realistic budget specific to the branding activities.
4. Commission ‘Brand Discovery’ research and gain input from:
    CEO
    Board members
    Managers
    Key employee groups
    Shareholders
    Customers
    Suppliers
5. Communicate with key audiences before, during and after the M&A.
6. Ensure retained service/product brands are consistent with the parent brand.
7. Determine how to select the most appropriate brand with which to move forward – Survivor, Combo, Evolver or Co-existing and who will be involved in the selection/decision process.
8. Develop a comprehensive employer branding program.
9. Research, define and communicate your unique brand proposition – understand it and believe in it.
10. Communicate to employees, investors and customers the strategic reasons behind the re-brand and what it comprises – this will foster acceptance and buy-in.
11. Establish a branding committee to oversee the development and implementation of the brand as well as brand champions to ensure it achieves its objectives.
12. Agree on an implementation schedule. Measure message and brand penetration and awareness at pre-appointed milestones – give it time.

Conclusion
Employ proven methodologies to determine the most appropriate brand model and allow branding professionals to play their part in helping to determine, communicate and embed the new brand. They will help determine – where it was, where it now is, where it needs to be and how best to get it there.

Remember in the post-M&A landscape that people are core – employee sentiment, investor confidence and customer engagement and loyalty are key factors controlling the success of the M&A. Effective branding and communications will influence and satisfy these audiences and gain their confidence and buy-in.

Managing the brand architecture of merging entities is a complex task. The need for effective brand management increases with the complexity of the M&A and number of brands and sub-brands being brought together.

Engage with a branding and communications process managed by branding professionals.Consider the branding program as an extension of the M&A investment and allocate appropriate resources at an early stage in the process.

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

Merger or Acquisition... that is the question

2008-09-07T16:37:00.000-07:00

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

Post M&A Branding – Part 2 of 3 posts

2008-08-28T23:13:00.000-07:00

Deciding which brand to absorb in the M&A

The true value inherent in the pre-M&A brands is often not researched and therefore not recognised. Fundamental branding decisions post-M&A are often driven by political or economic motivations rather than objective or strategic ones.

Post M&A branding is often limited in concept to simply re-naming the new entity – hugely important but in terms of a branding journey it represents only the beginning. Crossing this off the ‘to do list’ is not the end of the post-M&A branding activity. The name is a label, the logo a badge and the brand is the total experience created for your key audiences:

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

When it comes to choosing a brand model, the options are limited to the following:

1. The Survivor – the stronger and/or more relevant of the two brands is adopted.
2. The Evolver – the two brands become one new brand – part or all of the combined Brand Equity is absorbed to create a new evolved brand.
3. The Combo – the new brand retains the most valuable assets of the merging brands and presents a new brand model based on combining the two names.
4. Co-Existing – both brands co-exist – in acquisition mode, two or more brands are maintained and seen to operate independently of each other.

To select the most appropriate option it is necessary to understand the components that make up the individual brands (pre-M&A) and understand what the post-M&A brand composition is likely to be.

It is likely that the new brand will comprise the most positive attributes of the two merged entities. We need to decide what to retain, what’s duplicated, what’s good, what’s bad and what’s ugly.

Deciding which brand attributes are retained will form the basis of the new brand.

To achieve this we take a journey of brand discovery for each of the merging brands – values, benefits characteristics, differentiators, promise, attributes, drivers and loyalties are all explored with each of your key audiences.

Undertake analysis of brand perception from the two merging entities’ key audiences. When combined with input from M&A visionaries, architects and contributors, a new blueprint evolves for the new brand which details its unique structure and qualities.

The blueprint is then communicated back to the key audiences according to a carefully formulated brand communications campaign.

Finding the best branding options for your M&A

Accepted guidelines exist to steer a way through the complexities of the M&A process. Determining the most appropriate brand direction for the new entity is however, a complex affair devoid of guidelines yet requiring a skillset specific to the M&A branding objectives.

This is where advice from a competent branding professional is highly recommended.

The emotional impact of change on people can destroy the post-M&A process and acceptance of the new brand. It is likely that two camps will form within the merged entity – those for and those against the M&A. There may be fence-sitters but to the larger degree emotions will be polarised and loyalties tested.

M&A groups
For
Brand consultants
Accountants
Lawyers
Stock markets
Senior Execs
Banks (if funding)
Consultants
M&A managers
Auditors

Against
Employees
IT and systems people
Human Resources
Some directors
Managers
Banks (if losing a customer)

Perversely when all the corporate muscle flexing and late night boardroom bartering is over – when the entity should be stronger than ever it is potentially in a weak and vulnerable position.

The M&A is merely an opportunity, a starting point. From here it is poised to take advantage of the combined resources and opportunities. Conversely it may fail as the new engine fails to kick start, talented staff get nervous and uncertain about their future and head for the door, recruiting and re-training budgets escalate, competitors seize the opportunity to attack your customers while you are pre-occupied with the reactive challenges created by the M&A, shareholders react to the adverse sentiment generated by media comment suggesting an inappropriate and expensive branding exercise and resultant exposure of the board’s decisions whereby market value spirals increasingly out of control.

Look out for Part 3 of our three part series.
Click here to subscribe to our M&A Branding blog.

Yes, we’re terribly sorry! And we won’t do it again. Honest!

2008-07-07T21:01:00.000-07:00

A recent international news story tells how China’s Securities Regulatory Commission will now request public apologies from financial advisers of listed companies if returns on mergers and acquisitions fall below 80% of their forecasts. But wait it gets worse! If profit from the deals falls below 50% of their estimates, these poor advisers might get warned or even ordered to report to the authorities regularly. Pretty tough eh? So what happens if the returns fall below 25%?

Post M&A Branding – Part 1 of 3 posts

2008-05-27T20:14:00.000-07:00

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.
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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

2008-05-26T21:00:00.000-07:00

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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