Brand: The neglected asset in mergers and acquisitions

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This post originally appeared on CEOWorld.biz and was co-authored by Dan K. Golden, strategy director and Margaret Molloy, global CMO.

Mergers and acquisitions are big business—in 2013 alone U.S. companies announced more than $1 trillion in deals. With that much money at stake, it’s not surprising that companies devote most of their attention and resources to the financial, operational and logistical components of a merger or acquisition. This includes reviewing financials, integrating different facilities, combining leadership positions and hunting for efficiencies. Focusing on the implications of how the merger or acquisition will affect the brand is less tangible, and therefore often put on the back burner or just plain neglected. Ultimately, that can be a costly mistake.

Devoting a greater focus and increased resources to ensure the brand makes a smooth transition has significant benefits: companies can use current customer perceptions to simplify their story and improve how they engage consumers. But, if the brand is ignored or forgotten during the process, companies will be forced to devote even more resources to clean up the mess after the fact. Considering the brand along with the financial, operational and logistical components of a merger or acquisition will prevent this mess from occurring. As every homeowner knows, it’s almost always easier to spend time, effort and resources to build a strong home than to rebuild a poorly constructed one.

These three principles can enable companies to emerge from a merger or acquisition with the brand equity intact and, in some cases, even stronger than before:

1) Consider it an opportunity to start fresh.

Bringing together two organizations, workforces, cultures and product portfolios is challenging work. Companies often are afraid to disrupt the status quo, terrified that any change may be viewed negatively. They take a defensive posture, keep their heads down and work as fast as they can to get back to “business as usual.” In doing that, they ignore the fact that in many situations change is welcomed. Bringing two organizations together puts you in the perfect position to be bold and shake things up. You have the opportunity to wipe the slate clean and tell a completely new brand story, or to amplify the story already being told. It’s a chance to rethink the name, identity, brand positioning and brand voice. And, while at first glance this can be a daunting task, it’s an opportunity to revisit customer touch- points, refine and redefine the customer experience, and drive bottom-line results.

A great example of two companies that used their merger to redefine their brand positioning from scratch is the Group Health Incorporated (GHI)—HIP Health Plan of New York merger, which resulted in the formation of a new brand—EmblemHealth. When the two companies combined, they not only coordinated logistical elements like combining offices and relocating more than 2,000 employees within Manhattan, but they also developed a new name, logo and company promise. They took the time to educate existing customers and prospects about why EmblemHealth is more than just the sum of its parts. And it worked. The eight-year-old company is now worth more than $10 billion and services more than 3.4 million members—a marked improvement for all parties involved.

2) Plan early and plan well.

This seems intuitive, but it’s often forgotten or left until it is too late. While a lot of research and diligence goes into the merger or acquisition process, little is directed at the brands. You shouldn’t wait until the ink is dry to start thinking about your current brand and the new one you will be tied to. Instead, you should be creating a brand plan. Do your homework to develop a better understanding of the brand you’re merging with and the optimal strategy for emerging from the transition. Ask questions and get the facts. What is the market perception? What is the customer perception? What are the positive and negative equities and associations that come with the new set of brand assets? This will help determine whether you remove a logo, change a name or retire a product that has significant overlap in the combined portfolio. Most important, keep in mind where you want the brand to be years down the line. You can’t move forward without having an idea of where you’re going.

Lenovo is an example of one brand that does this well. While they had a major presence in Asia, Lenovo was relatively unheard of in the U.S. Their purchase of ThinkPad in 2004 was a carefully calculated first step in a major brand repositioning to attract a Western audience. By leveraging the ThinkPad brand, they were able to grow their business, raise awareness of the Lenovo brand, transfer brand equities associated with ThinkPad and ultimately improve global perceptions. When Lenovo announced they would be purchasing Motorola, it was a deal that made sense to customers, investors and the media based on the roadmap set in place by the ThinkPad acquisition.

3) Refine and clearly communicate your message for each audience.

As a company, you need clearly defined messaging for each of your audiences. Your customers are not your investors and vice versa. Customers are less interested in how this deal will affect their portfolio and more concerned with how their experience with your brand will change. You want to keep your brand messaging consistent to ensure a smooth transition during the process. Additionally, you’ll want to make sure you don’t forget your most important audience: your employees. Your employees can be your biggest brand advocates as they have the most invested in your success. They need to clearly understand how their role may be affected by these changes so they can continue to serve as a positive touchpoint for customers and be excited and motivated to work for the new combined entity. Just as a merger or acquisition is a great reason to re-engage and excite your customers, the same holds true for your employees.

The airline industry has a bad reputation when it comes to customer experience. This bad reputation has only been heightened during recent mergers within the industry, leaving customers fearing that consolidation will lead to fewer choices, higher ticket prices and declining customer service. We were traveling for business not long after American Airlines and U.S. Airways announced their merger. Our tickets were booked through American, but we were placed on a U.S. Airways flight. When our itinerary changed and we needed to rebook our flights, we didn’t have a clear idea of whom to turn to for rebooking. Should we call American or U.S. Airways? Whose kiosk should we go to? The employees we contacted at each organization couldn’t answer any questions and kept directing us back to their new colleagues at the other airline. Clearly, the airlines failed to disclose basic and important information to the two groups who were most affected by the merger and who were key to keeping the brand equity intact: employees and customers.

A brand is just as important as the location of the world headquarters or the new organizational chart. A brand continues to live long past the final handshake, in the hearts and minds of customers and employees alike. Upon merging brands, executives need to dedicate the attention and resources required to ensure a brand does not just merely exist once the deal is done, but thrives in fresh, new and unexpected ways.

Dan Katz-Golden is group director of strategy. Follow him on Twitter: @dkg000

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