Mergers and Acquisitions are back in the news, and back on the branding agenda. Last month, we talked a little about the American Airlines/US Airways merger. This month, the trend continues with another beloved brand stepping up to the M&A block: Zipcar is being acquired by Avis Budget Group. As M&A activity continues to increase, there is a looming brand question that must be addressed: what is the best way to brand a new merged or acquired organization?
There are different brand and naming scenarios that can result from an M&A. The two brands can continue to exist in their own right; one can be retired and folded into the other; or an entirely new brand and name can be created. We have talked about these examples before.
An M&A is first and foremost a strategic and financial transaction. But the success of that M&A can hinge on how effectively the most important intangible assets — brand equity and reputation — are managed. What are some of the brand considerations that must be taken in to account when orchestrating a major corporate move like a merger or acquisition?
Maintaining two brands can be expensive. While there are strategic reasons to keep two brands separate, it is often more efficient in the long run to consolidate the complex brand architectures that can result from multiple mergers or acquisitions. Many factors need to be considered before making a drastic move like retiring an existing brand, but a careful strategic examination may be worth your while as various benefits can be realized: avoiding customer and employee confusion, extra marketing costs, etc.
Do both brands target the same or similar markets and audiences? If so, there may be existing synergies and potential efficiencies in marketing and sales efforts through combining the two brands into one. For example, take Xerox’s 2010 acquisition of Affiliated Computer Services (ACS). While the acquisition expanded Xerox’s scope of services, the target audience and business category — “document and process management for businesses and governments” — was largely unchanged. So ACS was retired and Xerox rolled out a new campaign focused around the tagline, “Ready for Real Business”, positioning it around the expanded value proposition.
How strong is each brand’s existing equity? Is one brand stronger than the other? Do both brands’ perceptions lag behind the intended future direction? If both brands have a demonstrable customer following or a persistent reputation, it may be advisable to keep both largely unchanged. As a word of caution, be sure that the brand equity you are examining is real, and not a construct of internal politics or preexisting assumptions. It is tempting to cave into political demands, especially in the sensitive situation where one brand is asked to take a strategic back seat. Make sure that brand strategy decisions are based on just that — strategy — and not personal sensitivities. One example of a very successful branded merger is Wells Fargo and Norwest Bank in 1998. Although Norwest was the larger of the two, Wells Fargo had stronger brand equity. Instead of swallowing and dissolving the stronger brand, Norwest graciously stepped aside and allowed Wells Fargo to become the dominant brand.
When two companies come together as one, leadership must take a careful look at the operations of both organizations. In addition to the long-term strategic objectives, there are simple tactical questions that often get overlooked: Which billing system do we use? How can we merge sales teams? If the two merging companies have widely different operational structures and plan to merge in name only, a single brand may be confusing and will not have the intended unifying effect among customers, and certainly not among employees.
Another critical intangible factor is the internal corporate culture of the two entities. Here, we live by Peter Drucker’s famous quote, “Culture eats strategy for breakfast.” If the cultures of the two organizations are not compatible, the merger may be doomed from the start. Read a related post.
There are countless other factors that must be considered in the branding of a merger or acquisition. What are some of the other factors that can make or break a merged brand?