Managing brand equity during a merger or acquisition

Last month, we covered the reasons to not forget your company's brand when involved in a corporate merger or acquisition. This month we want to take a closer look at managing the equity that you have in your brand when involved in a merger or acquisition.

There are three different scenarios that your company could find itself in, each of which should be treated differently:

1. your company acquires another company
2. your company is acquired by another company
3. your company merges with another company

If your company acquires

If your company is the acquiring company, you obviously have the most control over the situation. This is not to say that this inherent power should be abused or used without concern for the company that you bought. In fact, you should be more careful in this situation than if you were at the acquired company.

When bringing a new company on board, from a brand standpoint, you must be careful to consider the following:

• Does this brand dilute our current brand or strengthen it?
• Does the acquired company have sufficient brand equity to keep its identity (even if only partially)?
• How will the acquired company's current clients view this acquisition (e.g. does it disregard a brand promise previously made)?

A carefully planned roadmap should be established so that the branding aspects of all acquisitions can be considered at the earliest possible time. The end result of this roadmap will be a clear determination of how the new brand will fit within your current brand. It may be strong, thereby retaining its identity; or, it may have very little equity and subsequently would get completely integrated into your brand.

It's possible that once all of the above considerations are researched you may ask yourself "why did we purchase this company at all?" That's not likely, but the earlier in the due diligence process this takes place, the earlier potential snags can be identified.

If your company is acquired

When your company is acquired, the situation is changed completely. Many times you are at the mercy of the purchasing company, and you hope beyond hope that they are at least taking a somewhat scientific approach to determining the new brand strategy.

It is tough to be in this situation without being somewhat defensive. This brand that you have worked so hard to build is suddenly in danger of being completely digested into another company and, especially if you are the founder, it can hurt your ego. Just keep in mind that the brand you helped to build is really the ultimate value that has been purchased, so regardless of whether or not the brand is left intact, its value has been validated. And, in reality, the brand is an asset that the acquiring company purchased, so they have the right to do with it as they please.

From a brand management standpoint, you must keep the following points in mind:

• Your customers must be kept informed about how this acquisition affects them – stay positive by focusing on additional resources and offerings.
• Your employees must also be kept informed. The first thing that goes through your employees' minds will be that they will be receiving a pink slip in the very near future. Be open and honest with them about their futures. This is especially true in this age of blogs and message boards. Rumors can spread through the ranks like wildfire, destroying employee morale.

The key here is to defend what's still valuable about your brand without making it personal. There is value in your company. Just don’t be surprised if you have to memorize new corporate colors in the near future.

If your company merges with another company

Mergers are a different animal altogether. Many times the term "merger" is used as a political tool so that the term "acquisition" is avoided, even though one company obviously is the dominant party in the relationship. Other times, it is truly a coming together of two companies that would benefit from the combined forces of each company.

There are a few different types of mergers, each of which has different impacts on the brand strategy:

1. Horizontal Mergers - two companies combine that have similar products or services
2. Vertical Mergers - two companies are combined that have products or services that are at different stages in the production process or are vertically related to serve a particular industry
3. Congeneric Mergers - two companies combine that have no sharing of customers but are in a similar industry
4. Conglomerate Mergers - two companies combine that are in completely different industries and have seemingly no relationship

All mergers have similar challenges from the brand perspective. For each of these, it makes sense to research the marketplace to determine the brand strength and general market opinion of the participating companies. If there is an obvious winner, the new entity would likely just take on that brand identity. An example of this would be the AirTran/ValuJet merger. This merger took place shortly after the ValuJet crash into the Everglades, so it was obvious that AirTran should be the name of the new entity based solely on public opinion of the two brands -- even though AirTran had very little brand recognition at the time. In that case, its relative anonymity worked to its advantage.

In every case during a merger, a logical conclusion could be to do away with both existing brands and create a new one from scratch. One high profile example of this would be the merger of GTE and Bell Atlantic to form Verizon Communications. Also, the company brands could be combined to garner the benefit of both existing brands. Time-Warner is a good example of this, being the combination of the two successful, well-known entities of Time and Warner Brothers. In those cases, I can assure you that much planning went into the decisions either do away with both brands or keep both. Those decisions are rarely made in a vacuum, especially at that level.

Conclusion

Whatever the position your company plays in the M&A process, good strategy must be your guide. And, the strategy should be founded upon a logical, intelligent process of determining brand equity and integration possibilities. Once that strategy has been determined and agreed upon, there should be no looking back.