The Role Of Brands In Mergers And Acquisitions
It is important to reflect on the role of brands during mergers and acquisitions and to consider the opportunities they provide. Unfortunately, it turns out that a great number of mergers fail in terms of market value. The resulting total value is often lower than the value of each individual part.
It is easy to say that this could have been prevented by paying more attention to the brand, but blind trust in market value is not a guarantee for success. It is a fact that, on average, 18 percent of the market capitalization of the world’s largest organizations is their brand value (Brand Finance 2017). This should be an incentive to immediately treat the brand as a strategic asset at the start of an acquisition. The merger between Ahold and Delhaize can be seen as a careful integration of two big and respected brands.
Even though Ahold had 61 percent of the shares, to the outside world it was presented to be a merger of equals. As a result, these two strong brands are not being pitted against each other. The acquisition was seen as reinforcing the brand perception of the stores of Albert Heijn and Delhaize, both in the domestic market in the Netherlands and Belgium as well as in the international growth markets.
There are also mergers that either don’t work out as intended or have a bumpy start. For instance, the merger between Ziggo and UPC led to a lot of inconvenience and complaints from their customers. The road to an optimal brand experience of the new combined brands is long, and the question is whether this cable company can actually develop itself as a valuable brand.
Increased Investment In Brand Management
Often stakeholders do not adequately consider the brand during a merger or acquisition. This is a missed opportunity. The brand is a business enabler, a strategically important factor within mergers and acquisitions that has to have a key position in decisions. The brand is no longer a thing to be dealt with by the brand manager.
In many organizations it becomes clear that it is of actual financial value. The brand and brand management should be strategic starting points for all activities in a merger, not only with regard to external activities, but also for internal activities. Dedicated and motivated employees play a crucial role in the total valuation, which can be achieved by successfully unifying the two organizational cultures.
Brand In The War Room
What is the impact of a merger on a brand? What is the proposition of the combined products and services? These kinds of questions deserve focused attention from the board of directors and consultants when making important decisions about the planned merger or acquisition. These decisive factors should exceed a simple sum of parts and the combined shareholder value.
The ultimate added value can be found in the level of attention towards brand value. Brand managers should be invited into the war room, and they should demonstrate how the brand can be leveraged in a commercial and strategic way. In fact, brand awareness should be the warm blanket that covers the merger.
Contributed to Branding Strategy Insider by: Marc Cloosterman, CEO, VIM Group. Excerpted and adapted from his book Future Proof Your Brand.
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