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Mergers and Acquisitions

Shockingly, 7 out of 10 mergers and acquisitions fail dramatically in creating long-term shareholder value. Somewhat frustratingly, it is often obvious to see why. With this in mind, I have identified ways that effective brand management and development can help during the process.

Mergers Acquisitions. Organisations can get wrapped up (quite rightly) in the process of due diligence, P&L, liability, assets and management restructuring without considering internal cultures and the end user experience. In many instances, the acquiring organisation totally forgets the need to preserve, align and manage the acquired brand assets, diluting, digesting and often destroying valuable and hard-won brand equity.

Eating out – an example of costly brand destruction

This was a few years ago now. I used to be a regular at Loch Fyne fish restaurants. White tiled walls, a fresh fish counter, chalk boards, oak floors and romantic black and white photography of little village fishing fleets. A premium, wholesome promise that was delivered through it’s food and service. However on a subsequent visit something had changed dramatically, and it was bad. The aggressive pushing of bread, low-rent side orders and a watery fish pie was totally out of place with the ambiance, brand promise, pricing and previous experiences. Reluctantly, I complained.

The long-serving Manager was still remarkably loyal but obviously very frustrated. He informed me that since they had been taken over by The Greene King Brewing Group, the food team had changed all the menus and service, the chefs were leaving as the cooking was not fresh (more of a ‘heat in the portion bag and serve’ affair) and in turn, regular customers were not returning – voting with their feet on taste and value. Sales naturally had fallen off a cliff. To compensate, the marketing teams were spending a fortune on local press ‘offer and value’ advertising when previously there had been little need for loyalty and word of mouth ensured the restaurant was kept busy. This further compounded the issue by diluting the premium offer.

Doing some curious digging online, other high profile alignment issues revealed themselves within the national press, blogs and social networks. Loch Fyne’s brand was all about sustainably sourced fish; this was found then not to be the case by the press. The wholesome values of the organisation were further scrutinised when it was revealed that some waiting staff were paid below minimum wage and that ‘tips‘ were used not as a ‘good service‘ reward from customers but a ‘top up‘ to achieve the minimum wage. The marketing collateral on and offline still messaged wholesome, quality and integrity. Not good.

A painful, expensive illustration of how quickly brand reputation can fall apart if you only focus on the bottom line; cost cutting and dismissing the newly acquired brand and its virtues. The culture crash of a pub value chain and a premium restaurant experience. The truth is on Trip Advisor.

Consider the value of soft factors, such as brand, from the start

Mergers and acquisitions. Undertaking due diligence of hard factors such as financial, legal and tax efficiencies is clearly fundamental. However, it misses the issue of the strategic fit of a potential merger and more importantly how the brand might be the source of potential revenue synergies. Decision makers must be asking the question: “When we own this asset, what are all the ways we can create value with it?”

Understanding and integrating two different corporate cultures (or not)

Management tends to assume that the other company is just like us and dismiss the need for deeper cultural understanding, especially when in the same or similar business. But, it’s one of the most common reasons for mergers going bad and soggy. Certainly, it’s much better to have a cultural understanding before a merger and keep two brands operating independently, until this situation changes. Ben & Jerry’s is an excellent example that has stood the test was acquired by Unilever. Throughout this critical post-acquisition integration phase, Ben & Jerry’s carefully successfully retained its culture, corporate identity and brand image and, at the same time, became more profitable.

Consider the strengths of both existing cultures, not just the negative stuff and weaknesses

When two companies merge, the assumption is often made that they should take the “best” of each company’s culture and integrate them, much like creating a “Best Of” CD from a band’s previous recordings. If only the mixing cultures were as simple as sequencing tracks on a mix CD or better still a playlist on iTunes!

Corporate brand strengths are sometimes just incompatible. 
Solid, more mature companies often acquire start-ups as a means of adding fresh thinking and products to their portfolio. What they often find is that the structural controls and well-defined processes that are an assurance of performance for the acquiring party may be impossible to mix with the less structured ways of the new kid start-up. A smarter integration than a simple addition of desired qualities is required.

Mergers and Acquisitions. Define a vision for the newly merged business

Branding is a crucial structure communication that can support and guide the overall transaction. Creating and communicating an aligned brand positioning and experience internally gives employees something to belive and rally behind. Externally, it gives clients and customers a clear, structured reason for being, the ‘WHY’. Without an establishing, a clear definition of the new vision, values and behaviour, the newly merged company’s employees can think this is no longer ‘them’ or ‘redundancies loom’ and begin defecting. Confused customers will lose sight of what it this merger offers, or may think the worst that their beloved brand no longer exists.

Using corporate identity to indicate a change (or not, carry on as normal)

Mergers and acquisitions. Favouring one brand over another might just be the right way to go where one brand is clearly more dominant, as Pfizer did when it took over Warner-Lambert. While this is the most common visual identity solution, it is most often done in zombie fashion without thinking, with the acquirer just using its corporate visual identity. Rather, consideration of the brands involved and defining the vision for the newly merged company (if it is a merger rather than acquisition) should be what drives this important decision.

Mergers and Acquisitions. A fusion of two brands

Less frequently used, but is the most practical choice helping to combine the best of both worlds. It is where design can add real value. Because a merger’s success relies in part on preserving strong positive feelings and association among customers and employees, it’s smart to pursue a branding strategy that seeks to transfer equity from both merging companies to form the new one. For example the M&A of United and Continental Airlines to United.

Ensure the day of the deal is not a missed positive news opportunity

Mergers and acquisitions. The announcement of the deal is the ideal time for a new identity to be revealed, for example – Carphone Warehouse and Dixons Retail did this when they merged to become Dixons Carphone (not utterly convinced myself, who has a car phone but equity plays its part here?).

It’s the time it can make the greatest impact, and one you won’t miss, if you’ve taken branding into consideration solidly and right from the start. Certain principle remains the same with mergers and acquisitions, but ultimately challenges are unique each time and are based on the sum of brand components of each joining party.

Mergers and Acquisitions are not just for the bigger players. SME’s need to consider brand clashed and cultural issues as they strategically acquire for growth

Mergers and acquisitions. It is tempting just to think that mergers, acquisitions brands issues, incongruence and miss communication only matter for the big players; the PLC’s. Smaller organisations, the classic SME’s should not ignore the collision of two brands cultures and propositions during purchase, merger and acquisition for growth.

It can be a very costly mistake

I have seen a teams of people clearly divided even though they are supposed to be part of the same company. I have seen customers leave the new acquisition as the brand loses its integrity. I have first hand seen an entire workforce leave when a high-tech creative company was brought by an ‘old school’ company with the aim to add missing skill sets. We are talking several million down the drain. The draconian management style just did not fit with the new culture. The previously creative environment was shut down the team moved to a new but miserable, uninspiring and sanitised office space. The entire workforce left within 12 months as the new management insisted they wore suits and ties to work, body art was covered up, unconventional hairstyles were frowned upon, no music in the offices and banned all social media.

The owner of the sold business set up a new company and the whole workforce joined this new business. Good for him, bad for them. A nice big bank balance and the same business bar a change of name. So the same principles apply but on a smaller scale, so there are no excuses for not considering and this critical component during acquisition.

 

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