May 16, 2012
The combination of abundant corporate cash reserves, low interest rates, generally modest expectations for organic growth and continued consolidation in many industries could make 2012 a robust year for mergers and acquisitions. In pursuing acquisitions, corporations will conduct extensive due diligence regarding the financial, operational, legal and other aspects of their targets’ businesses. Often overlooked in this process are many intangible assets, such as brand and reputation, which also contribute to the success or failure of a post-merger company.
Integrating the brands and marketing functions of two merged companies can be a major and lengthy challenge. For companies that are not adequately prepared for this effort, the integration may take longer than expected. If the process is done improperly, the ultimate impact on the post-merger business may even be a reduction in value for shareholders rather than an improvement.
Developing a brand integration plan as part of the overall preparation for an acquisition not only will minimize business disruption, but it also will affect how quickly the continuing enterprise will achieve the synergies and other strategic objectives expected from the deal. Here are a few key steps to follow to ensure that brand and reputation don’t get lost amid the complex financial, legal and other considerations prior to a transaction:
Define and establish an evaluation process that will provide a methodical assessment of brand and marketing synergies when considering an acquisition target.
Use checklists to assess the strengths, weaknesses and compatibility of both entities’ corporate brands, product brands and marketing functions. This knowledge will provide insight into what needs to be done to merge the two businesses and will help ensure that the resulting whole is greater than the sum of its parts.
Develop a decision tree to help determine how the acquiring company should integrate the new brand to maximize value.
Considerations include: Is the company to be acquired a leader in its market or markets, and does its brand have a greater value than the acquirer’s brand in those markets? Does the new brand open up new markets or channels for the acquirer’s existing products? Are there additional financial considerations or commitments that could enhance the brand integration? Such information can be used to more effectively integrate both organizations, better leverage the merger’s impact in the marketplace and more quickly achieve the desired synergies and value-creation goals.
Create an integration plan, as far in advance as possible, to guide the communications surrounding the announcement of the acquisition and subsequent events, identify the brand integration team, establish priorities to ensure a smooth transition, and set important target dates.
For companies with an aggressive acquisition strategy, generic plans can be established well in advance – now would be a good time – to be tailored later according to the size and scope of any potential transaction.
Evaluating the potential “fit” of two companies – including their brands, marketing functions and other intangible assets – can be the key to a successful acquisition. Much of the complexity and uncertainty associated with this critical process can be overcome through analysis and planning, along with a thorough understanding of the best way to use the brand strengths of both businesses to maximize long-term value.