SMPL Q&A is a blog feature in which we interview experts on all things relevant to branding, design and simplicity. In this Q&A we speak with Jeff Lapatine, strategy director, about brand naming strategies.
After a merger, acquisition or spinoff, companies have the choice to keep both names, keep one name or create an entirely new one.
What are the reasons a company would keep both names after a merger, acquisition or spin-off?
1. To ease cultural integration
Sometimes there are internal reasons to avoid creating a new name during the migration period. This was the case with Morgan Stanley Dean Witter, the original name after the Morgan Stanley and Dean Witter merger. The two companies had divergent cultures: Morgan Stanley had an aggressive investment banking personality, and Dean Witter, a conservative “white shoe” investment brokerage disposition. Both names were kept at the outset to ease cultural integration, but eventually the Morgan Stanley name survived as the singular parent brand.
2. To ensure established customer acceptance
Companies sometimes merge to combine different but compatible capabilities, and in doing so, make their sum greater than their parts. This was the case with leading chemical companies Lyondell and Basell. United States based Lyondell, with petrochemical and refining capabilities, significantly enhanced Europe-based Basell’s polyolefin capabilities. However, each company catered to distinct markets. Since neither name was sufficient to represent the offerings of both portfolios, management opted to use the joint name LyondellBasell.
3. To leverage the strength of two equally powerful brands in an industry
When two powerful companies merge, to assert industry-dominance, companies often maintain the equity of both merging companies’ names. For example, the merger of GE’s NBC brand and Vivendi’s Universal Entertainment brand to create NBC Universal resulted in a powerful multinational media conglomerate.
4. To prepare for a possible spin-off
Two companies often merge with the possibility of a spin-off to follow soon after. To this end, a merged entity may retain both brand names in order to use one name for the spin-off company. In the 1980s, American Express, with the goal of becoming a “financial supercompany,” acquired the investment banking firm Shearson Loeb Rhoades and named the combined entity Shearson/American Express. Ten years later, American Express sold its Shearson arm to Lehman Brothers.
What are the reasons a company would choose one name after a merger?
Using one name is generally effective at the outset of a merger or acquisition as long as it adequately reflects the combined capabilities of the two companies. A single name mitigates the need for a longer-term migration plan. In the case of most mergers and acquisitions, the name of the acquirer or the stronger player will typically prevail. Here are some other M&A brand naming scenarios where a company might keep one brand name:
1. Sometimes, the name of the acquired company prevails
When AlliedSignal acquired Honeywell, the merged companies moved forward under the Honeywell name since it was the more widely known brand.
2. To eliminate reputational baggage associated with one of the names
When one of the merging companies has valuable assets or capabilities, but a tarnished reputation, the new entity will often abandon the tainted name. This was Dow Chemical’s strategy when it acquired Union Carbide at the turn of the century, a merger resulting in $24 billion in sales revenue. Dow Chemical abandoned the Union Carbide name because of an internationally known scandal in which it was implicated. Union Carbide is now considered a subsidiary of Dow rather than an integral part of the parent name.
3. Unable to keep both for legal reasons
There are times when the acquirer prefers to keep the names of both entities, but can’t for legal reasons. This was the case when TD Bank acquired Commerce National. It was believed that Commerce would be better received locally than the Canadian TD brand. However, because there were several unrelated holding companies with the Commerce name, the acquired bank was renamed TD Bank.
What are the reasons a company would create a new name after a merger, acquisition or spin-off?
When two merged companies are capable of transforming their field, an entirely new brand name is often preferable. Here are some reasons why.
1. To signal a new position in the market or business direction
After the merger of Sandoz and Ciba Geigy, the company was renamed Novartis to stake out its place as a life brand rather than a pharmaceutical and chemical company. The merged companies eventually spun off their paint pigment business (renamed Clariant) to stay consistent with this new direction.
2. To distance itself from controversy
Changing one’s name in the face of controversy may be ridiculed but is sometimes successful, as it was in the case of the merger of biotech companies Aegerion and QLT. Aegerion had suffered scandal around insolvency and a controversial CEO. Once QLT agreed to merge with Aegerion, they renamed their joint company Novelion to distance themselves from Aegerion’s negative reputation.
3. To cover a broader geographic footprint
When the Bell Telephone Company of Pennsylvania and New Jersey Bell merged, in order to shed a geographically limiting name, the two companies went forward under the name Bell Atlantic and eventually, with more acquisitions and expanded capabilities, became Verizon.