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Creating Value From Brands

M&A Integration and how brands need to be managed

11Apr

All views expressed are my own and have do not reflect views of FTI Consulting in any way.

Surveys have revealed that more and more organizations are now seeking revenue growth as opposed to cost reduction through M&A; one of the key levers for maximizing revenue synergies is the integration of brands.

This aspect is one of the least understood and often ignored areas within the M&A realm. Companies fall short of harnessing revenue synergies attributed to the brand as integration teams get caught in the middle of harnessing quick hits through cost synergies and leave the brand benefits off the table.

Synergies from the brand at times tend to be more transformative and take longer to realize, they could also require some upfront investments counter-intuitive to the rapid cost reductions tied to immediate integration goals.

Brand Due Diligence

Foundations for a good brand integration start with the brand due diligence, the outcome of this due diligence often reveals insights around:

  • Complete view of all brand assets and liabilities across the two portfolios
    • Depoliticize brand migrations opportunities and risks upfront
    • Reduce overall cost, fatigue and churn stemming from integration efforts
    • Improve executive acumen, use resources more efficiently and deliver fact-based decision-making
    • Create brand protection plans for day one and expedite the integration process
    • Quantify and understand key metrics such as brand equity, brand health, brand loyalty and brand awareness across the two integrating portfolios
  • Brand Integration Planning

    The due diligence process informs integration planning from day one. While day one aspects typically focus on brand protection i.e., de-risking brand image, making sure key attributes and messaging align with the transaction rationale and mitigating any confusion for customers and employees. Tasks beyond day one focus on rationalizing brands, reducing costs where applicable and laying the platform to drive incremental growth from a cohesive brand strategy and execution. Several key questions need to be understood and answered in order to plan and execute M&A Brand Integration:

  • Are there multiple brands addressing very similar customer needs? What does need based segmentation look like?
    • Do customers switch between similar brands within the portfolio? Will they get confused between value proposition of the product and promise of the brand?
    • Is there large % of brands within the portfolio losing market share within categories of portfolios?
    • Has the number of brands within the portfolio increased without moving market share significantly, does the acquisition create risks or unlock opportunities for these?
    • How many brands in the portfolio are losing money or contributing marginally?
    • Do channel partners see brands competing amongst each other and hence only pushing part of the portfolio on the market?
    • Is the marketing spending too fragmented across brands and ineffective?
    • Are competitors outspending the companies individually in key categories or markets, how should integration address this issue?
  • Brand Integration

    There are several approaches to integrating brands, however they need to aligned with the overall transactional rationale. At any given time, the core revenue levers i.e., brand, product, channel, customer segments and culture must stay aligned. An organization pursuing any given strategy eventually needs to align and integrate all other levers but should use the primary driver as a starting point. 

    Acquisitions are rarely done to switch brands, they are mostly undertaken to fill the product or service gaps within existing portfolios. Hence having a pervasive brand strategy makes sure that everyone is aligned on the execution. The Brand elevation for the combined entity should be the primary goal and organizations should not get caught in the misguided efforts to preserve the acquired company's brand beyond a certain point in time, these sorts of misguided efforts have a huge drain on resources in the functions that should be driving growth and also cause widespread confusion for the customers. Products and channels must changed and changed very quickly to fit the brand strategy so that this can lay a platform for growth.

    Lastly, leverage quantified brand analysis (loyalty, health, awareness, equity etc.) to drive the integration strategy and execution. Decisions based on perceptions and gut feel need to be avoided in order to maximize transaction value.
    The common approaches to M&A brand integration are (non-exhaustive list):

  • Retaining name and symbol of acquirer
    • Retaining name but changing symbol (to acquired company or new)
    • Retaining symbol but changing name (to acquired company or new)
    • Keeping both, but one becomes a sub-brand of the other
    • Geographic brand architecture

  • Each of these strategies has to be picked in alignment with the transactional rationale and has pros and cons.

    For access to a simple excel tool on how think about these strategies, please contact me offline.

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