Brand implications for successful M&A 

Gonzalo Brujo is Global President at Interbrand The business world has braced itself for multiple economic shocks recently, not least from the impact of the COVID-19 pandemic. But amid all the uncertainty and restrictions imposed by lockdowns, M&A activity reached record levels – hitting $6 trillion at the end of 2021. While there have been further global events to negatively affect businesses this year – the Ukraine war and now rising inflation being the most shattering– M&A deals will remain very much part of the global corporate landscape. Indeed, any brands looking to be world leaders will have to acquire businesses to grow and extend into new categories and arenas and reach new consumers. If we look at those brands that have excelled in the tech space – and now dominate as the best global brands – acquisitions have supported their growth. From their founding year until 2020, Apple made 123 acquisitions, Amazon 111, Google 268, and Facebook (now Meta) 105. Last year, the biggest M&A deal was between AT&T’s WarnerMedia and Discovery – worth $43 billion. But while mergers and acquisitions are a huge part of the business landscape and are assumed to lead to business growth, their outcomes are less than certain (merger failure rates are between 50–85%). Two well-known failure cases are AOL & TimeWarner and Daimler-Benz & Chrysler, which can be explained in cultural and brand terms. In a nutshell, they both lacked a clear brand strategy. In the particular case of Daimler & Chrysler, each brand agreed to the deal with very different ambitions – meaning the merger would never succeed. For any company embarking on a deal of this nature – or starting the process of searching for one – there are some essential brand implications to consider and the first and foremost is that the brand will play a critical role in any M&A deal. Indeed, the strategic, cultural, and brand implications of merging two organizations are just as important to the long-term success as the price of the deal. So, to determine how to build a market-ready M&A brand, we need to start by considering the myriad reasons for an M&A: Grow market share Improve customer experience Improve value chain positioning Increase shareholder value Access new distribution channels Expand capabilities and access to technology Access key talent Expand geographically and demographically Expand into new industries and offerings Cut costs and boost revenues Increase competitive advantage Customer-focused opportunities. As global competition intensifies, M&A is – and will continue to be – a cornerstone of many growth strategies. The expectation is that M&A will increase shareholder returns and fuel future business growth but, as already mentioned, many have ultimately shown negative returns. Ultimately, the M&A journey is a maze. From pre-deal to post-merger, there are a million twists and turns and unforeseen roadblocks, both internally and externally. When looked at in this light, it’s easy to see why so many M&A ventures don’t reach their intended results: Unclear business and brand strategy Lack of a clear, strategic plan for becoming market-ready Not understanding the risks to current customer loyalty and key revenue streams Overlooking cultural integration risks that could lead to low talent retention Failure to identify brand equities and sources of growth Limited evaluation and consideration of customer alignment with the brand promise. However, these issues can be mitigated. There are four clear steps to help ensure a brand is ready for the process. 1. Create a strategic foundation The path to success starts with a strong strategic foundation for the brand and the business. It is important to clearly understand where the company is today (its departure point) and where it will be tomorrow (its ambition). This will become the framework for evaluating potential M&A candidates and ensuring key decision-makers and leaders are on the same page. A clearly mapped M&A strategy trajectory guides the company moving forward, but it is essential to ask the right questions at each turn. The ‘sweet spot’ of any M&A is the intersection of current and future marketplace expectations and the sustained ability of the brand to deliver on those expectations. This will allow potential synergies, opportunities, and risks to be unearthed. That means looking closely at the internal employee impact, and the external customer implications of the M&A. This will help complete the outline of the growth narrative — the challenges, opportunities, and implications of the M&A on your company, brand, and audiences in the short and long term. Additionally, considering your shareholders’ stakes is equally crucial – it will help dealmakers engineer powerful alliances that can create value for all. The motivation for a merger must proportionately represent the ambitions of the business and the shareholder. The financial health of the enterprise and the financial health of the shareholder should be considered in concert. In addition, the values and the behaviours of leaders must connect with the sentiments and priorities of the shareholder. Any perception of personal gain and prejudice, at the expense of the vast population of shareholders, invites cynicism and concerns that the deal may be motivated by greed and control. The language and tone used to communicate the merger must be consistent with the brand; then it will be familiar – and respected – by the employees. Often, a large portion of shareholders includes current and past employees. When a corporate speaks and behaves in ways that contradict the style and reputation of the brand, it invites sceptics who will challenge the intentions of leaders, building mistrust and suspicions. The onus is on the leadership team to create open and frequent dialogue to build understanding and advocacy among shareholders. Mergers are complicated chapters to write and execute – it’s important to recognize the emotional current that flows throughout. Shareholders are a powerful force for change and their inclusion in the process is an asset, not a source of contention. 2. Design a market-ready plan The next phase is setting the building blocks for a market-ready brand. This means creating a migration plan on top of your strategy and outlining exceptional customer experience principles that will lead to future growth. The insights gained by laying a strategic foundation will help guide this growth process and allow you to make informed, strategic decisions on how to implement the M&A, internally and externally. For instance, in a market such as financial services, there can be huge logistical problems with M&A especially as companies are likely operating on completely different platforms with associated differences in security. This has a significant impact on customer experience – following a merger the way customers navigate may have to change. The growth story is imperative to define the internal and external narrative moving forward. It should be derived from your company’s M&A strategy vision – explain the central rationale for the move and create a common set of expectations around the results of M&A for both customers and employees. This could include your new name, visual system, customer experience principles, and key messages. When BB&T and SunTrust merged to become Truist, it was the largest merger bank in the US. One of the reasons for the success of this merger was a clear purpose – its strategy was to be the main financial institution of the future and so invented a different way of banking. The plan will dictate the integration and optimization strategy for the foreseeable future. Based on the information obtained about the implications on employees and customers, you can set the timeline and key milestones for the merger. Culture eats strategy During a transition, it’s even more vital for an organization to align the brand, people, and culture with the vision for the new business. Your brand is the red thread that connects employees to customers and is the one thing that will differentiate you over time. When the people inside an organization understand who they are and what they stand for, they can nurture, evolve, invigorate, and truly bring the brand – and the business – to life. This is about identifying cultural alignments and building employee engagement as well as a retention plan. In an M&A situation, we need to protect the equity that we have in the current culture and examine existing strengths. We want to bring those forward to create something new and inspiring that will help employees through this tremendous change. What is the role of the brand in this endeavour? The brand can provide clarity and sense of purpose Your brand can help align the dots across the organization Your brand can give leadership a fresh platform for storytelling—one that is inspiring and helps employees to understand their roles in the new organization. For example, when Thomson and Reuters merged, the research showed the two companies had strong, but different, brand attributes that needed to remain intact in the new brand. The combination would not only enhance their existing strengths but also create a new one. Joining the brands created key foundational attributes of global, accurate and unbiased, timely, trusted and customer focused. Research pointed to Thomson Reuters being compelling for customers because of three brand pillars: relevant depth, practical intuition, and immediate effectiveness. 3. Equip the business It’s easy for leaders and the integration team to lose focus once the merger is complete and to stray from the agreed-upon timeline. While it is important to nail the operational integration, it is just as important to be aware of – and remain focused on – the changing conversations happening among employees and customers. This is where most M&As fail to realize their potential and succumb to the many risks, such as loss of customers, loss of talent, and failing to achieve synergies and cost-cutting goals. The market-ready plan gives the organization a roadmap to bring the new brand to life internally before the external launch. The goal is to have the new M&A brand prepared for life in the customer’s world. Some tactics that can ensure successful integration as you bring the new brand into the spotlight are: Conduct leadership and employee engagement programs Merge verbal, visual identity systems, digital touchpoints, messaging, and voice principles Deliver brand management tools and training Track key internal KPIs that were set out at the beginning of the M&A Communicate the M&A to customers and the sales team Secure quick sales to reinforce confidence in the M&A Communicate clearly about internal restructuring and changing roles Build detailed customer transition plans Identify (or create) pilot projects and experiences Establish an external launch and communications plan. 4. Deliver the promise When it’s time to deliver the M&A brand’s promise to customers and shareholders, it moves from being a theoretical construct or set of talking points in a press release, to the real world. People will be engaging with your M&A brand through the stories you tell, as well as the products, experiences, and services you deliver. Your promise and vision need to come through in a compelling and clear way. This is the time for your brand to shine – listen to, and engage with, your customers to ensure that they understand how the M&A is adding value to their lives. Their feedback, combined with employee feedback, will also allow your brand to be flexible and continue to evolve after the launch. The proof of success Businesses use M&A deals to transcend their own arenas or to gain new expertise – this simple aim makes business sense and can be hugely successful. But you need a strong brand and a strong ambition. Communication of those ambitions is vital; without it, the purpose of the deal may not resonate with the parties you need it to most. Taking employees on this journey so that they feel comfortable and not fearful – but rather excited and involved is part of the battle. Your brand culture will help you through this. If you can convince your internal public of the merits of the deal, you will be better placed to do the same with your customers. Of course, shareholders want to make money – and that can’t be ignored in M&As – but they won’t make money without customers. There is always politics at play and the more open and transparent you can be, the better in the long run. Ultimately the biggest success for M&A is that the brand catalyzes positive change.
Businesses use M&A deals to transcend their own arenas or to gain new expertise – this simple aim makes business sense and can be hugely successful