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Maintaining Brand Loyalty In An Age Of Mergers And Acquisitions

Navigating M&A successfully can ensure customer loyalty.

3Mar

The holy grail of brand loyalty is fragile, both in its cultivation and its maintenance. The rewards cannot be overstated, and companies will spend time, money and energy putting together a 'brand story' that aligns with the values of both the brand and their target audience. So what, then, is a brand to do in the face of a corporate merger, or worse, an acquisition?

In many areas - particularly in, but by no means limited to, pharmaceuticals - mergers and acquisitions (M&As) are the new research & development (R&D). For pharma companies, it is an easy, quick way of filling their drug pipelines; M&As are so appropriate in pharma thanks to the incredible investment necessary for successful R&D in the market. For any business, M&As are an opportunity to expand into different markets without having to start from ground zero, allowing for diversification of products and services, as well as offering smaller companies the opportunity to get experienced leadership on board. A December 2015 PricewaterhouseCoopers report called 2016 the 'year of merger mania'; 2015 broke records for M&A activity and this year is set to be no different. The tendency for activity in times of financial uncertainty has seen an explosion of M&As across sectors since 2008.

But the dangers of M&As are potentially as great as the desired reward, and few companies persistently find success from them - Heinz, Unilever and Electrolux are three of the lucky few. Yaakov Weber, Christina Oberg and Shlomo Tarba, in their 2014 book 'The M&A Paradox: Factors of Success and Failure in Mergers and Acquisitions', found that at least 50% of mergers fail, and the percentage of companies that failed to properly achieve the goals of the merger is, in recent years, as high as 83%. A primary concern of such activity is the dilution of brand message and personality that can come with the conflation of all-too-often ill-fitting ideas.

A brand is, at its most basic, a company's personality. It is the face of the engine room, the veneer on the corporate practices underlining even the most 'organic' and 'everyman' companies. Building a brand that encourages loyalty can guarantee return customers and, in many ways, can encourage those customers to advertise on your behalf. When mergers occur, it is essential that the central tenets of the two businesses remain intact, whilst communication with both customer bases must be maintained equally. Focusing on one side whilst overlooking the other is a recipe for disaster.

Unilever - the consumer goods giants - are particularly successful proponents of M&As, having maintained the strong brands of their subsidiaries. Dove, Hellmann's, TRESemmé and Ben & Jerry's have all retained their unique, carefully crafted identities - including the latter's involvement in social projects and their boldness in support of issues like same-sex marriage and the Occupy movement. Throughout the post-acquisition phase, the ice cream giants managed to retain its corporate identity whilst becoming profitable. The fundamentals of the initial building of brand loyalty apply here. The values on which your company's brand story has been created must not conflict with either the merging partner or the parent/subsidiary company. Generally, in the case of mergers, the dominant corporate identity tends to be assumed - exemplified by Pfizer's $90 billion hostile-takeover merger of Warner-Lambert in 2000.

Things are a little different outside of pharma, though, and the smaller merging party must resist their message being swallowed up into the larger company's. The message that developed the loyal following should not change on account of the merger; cultural misfit is not an exclusively in-house problem and is one of the key reasons mergers fail. Loss of credibility of message can be a dangerous side-effect of M&As and steps must be taken to ensure the two messages retain their fundamentals. This key detail heaps greater importance on the initial decision regarding the selection of a merging partner - pushing together two disparate or conflicting ideas or stories is a recipe for disaster. 

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