Branding strategies when embarking on a buy-out or merger

Making the right branding decisions when undergoing merger and acquisition activity is vital for the success of any deal. As a result, when buying a business or merging with a company, those involved with the deal need to take time to formulate their branding strategy before, during and after the deal takes place.

Branding before a deal
Before a deal is even close to being signed off, anyone looking to acquire or merge with a business should ask themselves some important questions about branding issues. Compatibility is perhaps the most important thing to consider here, along with shareholder value and these factors should both form part of the deal evaluation process.

When looking at brand compatibility, dealmakers should analyse any cultural, organisational and structural clashes that may cause problems for the branding team. When considering synergies that might arise from a takeover or merger, buyers should ask themselves if market reach, brand portfolio, market share and resource gains could be made as a result of a deal. If a buyer cannot clearly see some possible shareholder gains from a buy-out or merger, it may be time to walk away.

Another reason to walk away from a possible deal is a clash when it comes to brand identity and values. It is worth looking at both businesses’ culture, outlook and philosophy with a view to establishing if either reputation could damage the other. Major conflicts of brand identity and values could prove problematic. For example, if a family-oriented travel firm merges with a business specialising in raucous trips for a young party crowd, the branding process could fall flat thanks to the existing conflict between the brand identities. Perhaps the best way to explain this process is to ask how and if the two brands can co-exist.

Branding during and after a deal
Once the decision has been taken to go ahead with a merger or buy-out, the main question dealmakers face is ‘which of the brands should we keep?’ The answer will depend on many factors and the final decision may not be as obvious as it first appears.

It is easy to presume that the acquirer brand will take over from the acquired brand, which is often how it works, particularly if the acquirer is the market leader and is buying up a smaller competitor to cement its position at the top. However, this scenario should not be a given and alternatives are worth considering in order to create the most effective branding strategy for the new, larger business.

For example, many dealmakers opt for the brand that is the most well-known. This can easily backfire, depending on whether the brand has a good or bad reputation. In the case of branding during a merger, bigger is not always better.

Smaller brands can often hold more potential and strength in the eyes of consumers than larger brands and thorough market research will help buyers establish whether this is the case. Other merging firms will see the entire project simply as an exercise to strengthen their positions, in which case, taking the market-leading brand will be a no-brainer.

Customer value
However, the real identifying factor for the optimal brand is customer value. A failure to maintain revenue growth is a major contributor to the failure of a number of mergers and selecting the wrong brand will contribute to this failing. Find out what the customers value in the brands and choose the one that reflects best what the customers want.

Sometimes the decision is made to create a new brand including both former brand names, rather than opting for one or the other. This often takes place when the two brands are considered equals in terms of their market share and reputation with customers. Good examples are the mergers between Daimler and Chrysler, who became Daimler-Chrysler and the AOL-Time Warner rebrand, which were both successful in creating new entities involving both former brands. These joint brands have shown that this strategy can work providing a new personality is created for the joint brand, which is separate from previous brand identities.

Sometimes a flexible brand approach is taken – particularly when the businesses involved in a merger or acquisition are separated geographically. This strategy will see two (or more) brand names included in the new brand, but with emphasis put on one or the other depending on the location. The best example, perhaps, is Renault-Nissan, for which Nissan is the preferred brand name in Asia and the US and Renault is usually used in Europe.

There is flexibility within all of these options, and promoting and communicating the values of the chosen brand will do wonders for the new business entity. Now is the time to put the staff to work on conveying the brand message. Jim Moran, founder and managing partner of New York-based branding firm, Co-Op, explains, "Make your employees the brand ambassadors of your company. Who better to explain who you are than your combined teams?"

In conclusion, although rebranding can be seen as an expensive option, buyers or merging firms should not be put off. These costs are often justified, providing the rebranding is the best thing for creating customer value - helping to drive profit and revenues further down the line.

The important thing to bear in mind when embarking on a deal is that any kind of merger will have a huge impact on branding and it should form a large part of any due diligence procedure. These pre-deal checks need to go much further than simply the accounts in order to establish if a deal is worth doing. Without the clear potential for a successful branding strategy, a buy-out or merger could be doomed from the beginning.

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