An effective strategy can send the right signals, create value and enhance the likelihood of a smooth integration. But not being a priority means that the corporate brand that does emerge may well be sub-optimal, often reflecting egos or horse-trading in the final negotiations.
Often the brand strategy receives serious attention only after the deal is done, according to this research, with a management bias towards simplicity and expediency rather than what might deliver the greatest value. In two out of three deals, either the target company's name and symbol disappeared immediately (thus eliminating the target's brand equity) or the two corporate identities continued to exist independently. While both can make sense, it is questionable whether these strategies should be so dominant.
A total of 10 brand strategies are identified, grouped into four categories that communicate fundamentally different messages to customers, employees and investors:
- Backing the stronger horse: the key message is the benefits to scale and presence that can best be achieved through the adoption of a single, well-known identity.
This can be highly effective in consolidating industries. Adopting the lead company's brand is most widespread: this sends a clear message of who's in charge and - where the lead has a stronger reputation - represents an upgrade for customers and employees of the less prestigious brand.
But adopting the target firm's brand instead can make sense and allow a deal to be presented more as a merger of equals. Another possibility is to share a combined corporate name for a year or two, then drop the weaker. This allows the weaker brand's equity to be absorbed gradually and gives both companies time to adjust. A final option is to combine one of the names with a new logo to signal a fresh beginning.
- Best of both: the aim is to show that each company is contributing significantly to the merged entity's future. One option for communicating that is to combine both companies' names and visual identities. This can be done at a corporate level (DaimlerChrysler, for example) without changing customer brands. The logo could also be changed to signal a new vision.
Another option is to adopt the name of one company and the other's logo.
- Different in kind: the creation of an entirely new brand to suggest that the merger has created a business and opportunity greater than could have been realised by the companies independently. This is a bold approach but also the most risky, involving writing off the equity in both the lead and target brands.
- Business as usual: for portfolio transactions that aren't about synergies between employee and customer bases. Both brands are kept to retain their equity.
Merging the brands and branding the merger,
Richard Ettenson and Jonathan Knowles,
MIT Sloan Management Review, summer 2006, Vol 47 No 4
Review by Steve Lodge