Mergers and acquisitions are hard. They are complicated. They are fraught with details, decisions, and innumerable contingencies. From financing to IT integration, there are lots of moving parts.
Yet there is one element that is often overlooked or at least under-looked: Branding. It has the potential to create chaos, expense, and confusion in both the short- and long-term. Before you acquire a company you must have an understanding of and a plan for the target’s brand before, during, and after the deal.
Why? For one thing, the brand’s value is one of the assets you’re purchasing. That’s just the beginning. There are many important questions you need to consider.
Are you getting your money’s worth? How strong is the brand’s connection with its customers? Can it withstand competitors’ advances while your deal closes and the company integrates into yours? How are you going to pay for integration costs when it’s time, and what does that look like exactly? Is it re-skinning a web site or more extensive like changing signage on buildings and vehicles in multiple cities?
Unless you include brand in your due diligence and integration plans, you’ll never know until it’s too late.
Primary M&A Branding Factors to Consider
One of the many factors you should consider before making an offer is the brand’s value. There are many ways to calculate brand value but at its core, brand value aims to quantify how much of a company’s revenue can be attributed to its brand. Are customers buying because of the offering, because of their connection with the brand, or a combination of both? For example, perfume purchase is practically all due to brand. Utilities are practically all about the offering. Most everything else is somewhere in between.
Another factor to consider pre-offer is what to do with an acquired brand. That is a big question, influenced by a number of factors. The first, of course, is your own brand strategy. Do you have a house of brands or a branded house? Even if you have a house of brands there will be decisions to make about the acquired brand.
If you are rebranding the acquisition, the next question is typically when. Again, another big question! It’s important to think about your customers, where they are with the acquired brand, and where you want them to be with your existing brand. You need to plot a journey for them, a journey that changes from one acquisition to the next because each will take a different amount of time and have a different number of waypoints along the way.
As a general rule, however you approach one acquisition should be the way you approach all others. Consistency is always preferred. If acquisitions play a continual role in your business strategy, you may want to think about creating something like a brand migration toolkit or playbook to ensure you answer these questions in a consistent and thoughtful manner every time they are posed.
What to Plan for in Advance of Closing a Deal
Once you have decided to strike a deal, here are the six areas you should develop a plan around before it closes:
1) An overall roadmap for the brand
As discussed, you must determine your expectations for the brand and create a roadmap to get you there, including how you are going to pay for it. If you leave that until later either it won’t get done or it will take budget away from important work such as lead generation and business development.
2) Customer reactions
It’s crucial to get your head around how the acquisition’s clients will react, as well as your existing ones. I have been part of deals where we knew the clients of the acquisition would be skeptical of the new ownership and other acquisitions in which the customers would be thrilled. You need to know exactly how they feel in order to protect the revenue they bring with them during the migration.
3) Competitor reactions
Speaking of revenue protection, it’s important to think about how your new and existing competitors will react. Will they pounce? What negatives about the deal and migration can they point out? How do their offerings stack up against your new portfolio?
4) Employee reactions
Acquisitions can be volatile times for employees of both companies. Fears of layoffs, job changes, or culture shock can slow business as usual to a crawl and negatively impact customer satisfaction. Know what the likely reaction will be and plan accordingly.
5) Messaging strategy
The previous four points feed directly into this one. Once you have a general sense of what your most important constituencies will think, articulate a consistent narrative to help them understand your vision and what it means for them.
For employees, remember that brands — by design — are emotional. Weening employees from the original brand to yours is important and sensitive work. If you will eventually ask them to walk away from the brand they helped build, you have to give them something to walk towards that is equally emotionally compelling.
6) Roles for the acquisitions’ principles
If you are acquiring a company whose brand is synonymous with the principal’s identity, plan for how you will transfer that brand association from him or her to your brand. This challenge can be a delicate one — all the more reason to get out in front of it early and set clear expectations. Even if the principals are not the face of the acquisition’s brand, think carefully about what role you want them to play.
After the Close
If you spend enough time thinking carefully about life after the deal closes and plan for it accordingly, your brand should fare much better and the brand migration should go much more smoothly. Your only remaining action is to periodically re-review all the constituencies we’ve talked about so far and see how they are holding up to both your brand and business strategies.
Photo by: Brian Sikorski