Managing the Brand to Make Mergers Work
Most mergers fail. Many organizations, ranging from McKinsey & Company to Big Four accounting firms to the Hay Group, the human resources consultancy, attests to this fact. In one such report on mergers and acquisitions, KPMG reported that “61% of M&A created no discernible difference, or actually destroyed value.” Why this failure occurs remains a matter of ongoing debate.
Among the mergers that did work, KPMG found that there were six keys to success— three “hard” keys, which are about the business and three “soft” keys, which are about people.
The hard keys are:
+ Conducting effective due diligence before the deal
+ Achieving strategic synergies
+ Realizing significant efficiencies in operations
The soft keys are:
+ Forming the right leadership team
+ Resolving cultural issues
+ Developing effective communications
Not surprisingly, KPMG concluded that addressing both sets of factors in an integrated way was instrumental to improving the odds of success.
BRANDS ARE BUILT ON THE STRENGTH OF THE ENTERPRISE AS A WHOLE, NO MATTER WHERE THOSE STRENGTHS COME FROM.
In our experience, mergers falter for a number of reasons that aren’t immediately obvious. Mergers change the rules. They break old habits and challenge convention. They undo the existing frame of reference for everyone—for employees, customers, investors, and others. They change reality, thrusting stakeholders into a state of limbo. Customers ask, How will the change affect my relationship with the company? Employees wonder, What is the meaning of this merger or consolidation to me? Investors ask, How will the deal affect growth and earnings?
No matter how the merger comes together, the resulting organization will be different in how it creates value for its various constituencies. Understanding, communicating, and living that difference becomes everybody’s job, from senior management to rank-and-file employees.
The main brand challenge is then to establish a new frame of reference that makes it easy for people to grasp the logic of the merger or acquisition—the story behind the deal-and foster support for the inevitable changes the merger brings.
Branding provides a unique advantage when it comes to making mergers work. By definition, brands integrate. They take into account all parts of an organization. Brands are built on the strength of the enterprise as a whole, no matter where those strengths come from. They align the interests of all stakeholders to everyone’s advantage.
While brand development comes with its own challenges, the process itself can help smooth the merger experience by clarifying overarching, positive themes people need to understand, communicating these themes more effectively, and putting into action operating policies and practices that will help the company realize the benefits they seek.