Brain Food: Crash course in ... disposing of a brand

There are too many brands in your portfolio, and it has been decreed that at least one has to go. How will you sell and get the best price?

by Alexander Garrett
Last Updated: 31 Aug 2010

Avoid a fire sale. If you've just acquired a brand and the Competition Commission orders you to sell, you didn't do your homework. 'The two main reasons for selling a brand are not being able to make enough from it in terms of return on investment, or when it is not core to your power brand strategy,' says Rita Clifton, chairman of consultancy Interbrand.

Don't neglect it. A brand that has been poorly supported for years could require huge investment by a buyer, so it won't be very attractive. 'Any potential buyer can obtain external data on how much has been invested in the brand over a prolonged period,' says Marcus Mitchell, a director of branding and design consultancy Corporate Edge. 'They will be able to see if your spending is a blip.'

Put it in apple-pie order. Steps to make your brand more saleable include properly documenting its visual identity, trademarks in different territories, distribution contracts, and so on. The buyer's legal team will want all of this as part of their due diligence. It also pays to take any steps necessary to establish separation from the parent company.

Could you license it? If there are insufficient funds to invest in the brand, you may consider some form of licensing as an alternative. A franchise means you retain ultimate control of the brand and receive an income without having to make all the investment, points out Mitchell.

Decide what you're selling. There are no rules about what's included when you sell a brand. It could be the right to a name in a particular territory; or it could be a complete business, including people and production lines. 'A buyer will want whatever makes that brand the way it is,' says Clifton. With a service brand, the people may be integral to the sale, but with a consumer brand, you may do better to sell the production lines separately.

Keep it discreet. Best not to put up the 'for sale' signs if avoidable; you could upset a lot of people, and customers may react adversely, particularly with a B2B brand.

What's it worth? The $64 billion question. Consultancies can offer independent valuations, but ultimately it's worth what someone is prepared to pay.

It may be more valuable to a trade buyer, for which it takes out a competitor, than to an entrepreneur or investment vehicle.

Aim for a clean break. As in a divorce, it's probably best if you and your brand go your separate ways, though you could still be liable for any consequences relating to your period of ownership.

Do say: 'You can have the keys to the factory, or just the trademarks - depending on what you're prepared to pay.'

Don't say: 'Tell the brand manager he's just been sold.'

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