Mergers and acquisitions in the last decade have reached all-time highs. With the financial news media filled with reports of huge mergers involving publicly traded companies, thousands of these transactions take place each year involving privately owned companies.
While combining two or more companies includes many hurdles, one of the most significant challenges is carefully planning a brand strategy for the future.
A brand strategy where you align branding can become an afterthought in the merger process. However, taking that approach can and will lead to prominent struggles when you reactively put yourself in a place where you have no choice but to pursue a rebranding strategy urgently.
But not to fear, we’ve created a guide to help you better understand how brand equity will influence the decision process. And we’ll cover four of the most respected options for rebranding strategies.
The Dilemma Of Naming Merged Companies
People sometimes assume that the acquiring company is the financially more powerful organization and, therefore, the stronger brand. And while that can be the case, there can still be tremendous value in the brand identity and equity of the acquired company’s name.
Consumer loyalty and brand recognition are likely tied up in the acquired brand, which often took the company decades to build. Simply saying that combining the two companies under just one brand name doesn’t always make sense.
When looking at the history of some of the biggest mergers and acquisitions, it’s less common for companies involved to combine under one name.
Ultimately, the dilemma of a merged brand strategy comes down to:
- choosing one dominant brand
- combining brand names
- operating as distinct brands
- creating an entirely new brand
Before we get to those different brand naming options after a merger or acquisition, let’s first look at brand equity.
The Importance Of Brand Equity
Brand equity is the most crucial term in developing a brand strategy for a merger or acquisition. In simple terms, it means the value a business gains from a brand name when you compare products like-for-like with other brands or generic products.
And it’s not only billion-dollar corporations with internationally recognizable brand names with equity and market share tied up in those names.
Small local companies can achieve brand value over decades and generations operating under the same name.
In some cases, the acquired brand equity can be extremely low compared to the acquirer. However, there is still a significant amount of value in comparing the two brands to assess what level of equity is worthy of retaining in both brands and the impact of each under a new naming strategy.
Let me explain.
4 Strategies For Post-Merger Brand Naming
Brand architecture and strategy development is a complex process for marketing teams at the best of times, which only becomes more difficult when you try to merge two brands.
Let me show you the four options you must assess to see which makes the most business sense.
1 – Maintain The Status Quo
The first option is for the two businesses to continue operating under their names. This type of merger structure involves the acquiring business becoming the parent company and the acquired company’s name becoming a subsidiary. It can then even operate independently.
This can make sense when two companies merge, and the acquired brand identity is valuable.
For example, in 2005, Procter & Gamble acquired Gillette in a deal worth $57 billion. But have you ever seen razors advertised under the P&G logo?
In this case, there was so much brand recognition and loyalty built into Gillette that it made no sense to merge the razor business with a new brand. Instead, Gillette remains one of the dominant brands on personal hygiene shelves, but it’s owned and controlled by P&G.
2 – Go With The Brand Equity Winner
There are also scenarios where a brand merger or acquisition process involves eliminating the acquired brand name. It can make business sense if a large corporation acquires a smaller company, which can gain much revenue under the new identity.
But there are also situations where a new brand naming strategy makes the most sense if a poor reputation is prominent in the corporate identity of the acquired company.
While this might sound extreme, we have some examples to help explain it.
- In 2008, Delta Airlines acquired Northwest and completely rebranded the entire fleet under Delta, which had a much larger international reach and recognition and aggressive pricing power during an economic downturn.
- Also, in 2008, Barclays Bank acquired what remained of Lehman Brothers during the financial crisis. In this case, there was no brand value left in the Lehman name, and if anything, it has remained a name directly associated with one of the biggest economic crises in history.
Barclays essentially bought the last remaining productive assets and killed the Lehman Brothers brand all in one go. It was the only viable option in this case.
Read More: The Essential Elements Of Effective Brand Naming.
3 – Merge Under A Combined Brand Name
The third common option where an acquiring and acquired company has near equal equity in their names is to merge under a combined name. The branding process doesn’t create an entirely new company but combines both resources under a new name.
The food giants Kraft and Heinz merged in 2005, but it was evident that both companies had a tremendous amount of loyalty, reputation, and equity tied up in their names. The solution was relatively simple and involved rebranding as the Kraft Heinz Company.
A similar thing happened with merger partners Louis Vuitton and Moët Hennesy, where the luxury brands involved different products ranging from designer clothing to champagne and cognac, and all names having much value.
Rebranding champagne and cognac under Louis Vuitton would have resulted in the loss of a 280-year-old brand name that is irreplaceable in the alcohol industry, and, therefore, it wasn’t a viable option.
4 – Create A New Memorable Brand Name
The final option is to create an entirely new entity under one company name. We see this happen when multiple brands are involved, often occurring gradually over time. In this case, the existing name may become less and less relevant.
An excellent example of this involves looking at the company structure of Oath, which Verizon owns and includes over a dozen media brands, including Yahoo, AOL, Huffington Post, and TechCrunch.
Each acquired company still operates under a unique name, but the overall company division that manages the organization is named Oath. It’s a unique approach and probably the least common option for mergers and acquisitions, but it’s still one for a marketing team to assess.
And it becomes more viable when a company gradually acquires multiple other companies over time, where creating a single corporate brand is increasingly challenging.
Carefully Plan Your Merged Brand Identity
You must take a carefully planned approach, researching the benefits and downsides of a merged branding strategy while including a strong sense of what results in the best value and ROI.
As a brand development agency, SmashBrand offers professional services to help you research, design, and test merged branding strategies. This allows our clients to develop much more substantial brand equity at a time when the restructuring process can be the source of enough problems to deal with.
Data-Driven Brand Development That Can Guarantee Sales Performance.
If you need a new name or rename with performance predictability, we can help. SmashBrand is a brand development agency that researches, designs, and tests all brand assets to ensure peak shelf performance. Book a time to learn more about how we can help you find the right name and to discuss your project with our team.
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