Branding the Merger, Merging the Brands


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Branding the Merger, Merging the Brands

  1. 1. Branding the Merger, Merging the Brands by the author of Leveraging the Corporate Brand James R. Gregory, CEO Corporate Branding, LLC Published for
  2. 2. Branding the Merger, Merging the Brands Merger activity is positively frantic—hundreds are initiated each week. As one indication, demand is actually growing for skilled merger and acquisition specialists, as other professionals in the financial industry are laid off by the thousands. But, mergers can too often be minefields. According to the Conference Board, less than half of the mergers completed during the 80s and 90s have created real value for shareholders. McKinsey & Co. claims that nearly 80% of mergers don’t earn back the costs of the deals themselves. And Across the Board says the average merger has a 50% chance of reduced productivity and/or profits. Mergers, and the talk surrounding them, also can hurt stock prices. When rumors of a takeover bid for Chevron from the Royal Dutch/Shell Group withered, Chevron stock declined as a result. Similarly, Consolidated Freightways Corp. stock fell as much as 18% after it broke off its own merger talks, only to rise 6.4% on speculation of another possible combination. According to a January 1999 article in Across the Board, when Sunbeam made its triple takeover announcement (of Coleman Co., First Alert and Signature Brands), its stock was at a 52 week high. In less than 4 months, sales, marketing and operational chaos caused it to plunge more than 84%. Finally, mergers typically produce confusion, conflict, fear, anger and uncertainty among employees. This leads to talent raiding— non-merging companies scoop up good people who are worried about their futures just when distracted executives need them most. Altogether, not a very pretty picture. 1
  3. 3. Branding the Merger, Merging the Brands Branding the merger, merging the brands What’s the problem? And what could make the difference? The classic corporate brand communicates its company’s The integration process—or lack of one—has been blamed essence, character and purpose, and calls to mind its products largely for merger failure. and services. Correctly created, managed and presented, it should instantly flood consumers in all audiences with confident and BMW, which purchased Rover Group Plc in 1994, found it difficult accurate, expectations—why would they think, or want, to go to turn a profit from the merger. Chairman Bernd Pischetsrieder anywhere else? The new brands created by merging companies told Manager Magazine, “We made the mistake of not acting should purposefully shore up consumer confidence, at the same quickly enough to push through integrated work processes.” time igniting their excitement. (Reuters, December 1998) Unless vision and values can be made to align, and lines of communication remain open, those The power of a corporate brand shows up in its stock price. processes are doomed. Companies that understand this are Corporate Branding’s research indicates that, on average, a more likely to be viewed favorably by potential acquisitions, and corporate brand impacts stock performance by 5%—a significant to experience merger success. number that can make a major impression on market valuation. The Wall Street Journal cites Ford as the automobile industry’s During changing times, particularly throughout mergers and “acquirer of choice,” given its reputation for “providing capital acquisitions, the corporate brand can be a lifeline. All constituencies, and expertise without diluting a brand’s character.” looking for reassurance that, post-merger, they will still be able to depend on what they have come to value, cling to the corporate Vision, values and communication are at the heart of brand brand. It becomes a symbol not only of what to expect in the building, which is at the heart of successful integration. future, but of why the merger is taking place at all. All eyes are However, with so much to think about—so many distractions on the brand—it’s the kind of visibility that can prove enormously —harried executives and bankers often give short shrift to their leveragable. Be prepared to exploit it. Protect, preserve and corporate brands, which are among the participating companies’ leverage the value of your corporate brand always, and especially most important assets. They can—and should—be fiercely during a merger. protected and put to work immediately on the merged company’s behalf. In fact, making the brand part of the deal itself is one way to circumvent merger breakdown. Do yourself a favor, and get it on the table from the beginning. 2 3
  4. 4. Branding the Merger, Merging the Brands 1: Remember: The brand is the merger. Like it or not, the world will see the new brand as a symbol of the “Why?” behind the merger. Developing the corporate brand so that it reflects the “why” accurately and appealingly is critical. It can only happen if you ask the same appropriate questions throughout the merger negotiations that you ask throughout the branding process. Why, and how does our growth depend on this merger? Eight Principles of Branding a Merger What does it do for us that we could not do on our own? What can we expect from the future? Will this merger shift our values, mission and/or vision? What do Wall Street, our employees and our customers expect from us? Can we manage these expectations? How? What characteristics and competencies combine—and live—in our CoreBrand? Failure to understand and articulate the brand will likely lead to failure of the merger itself. Avoid merger meltdown by telling the well-considered truth about your brand from the very beginning— to yourself, to your merger partners, to your employees, and to your consumers. 2: Exploit initial interest. Corporate visibility among the media, employees, customers, shareholders and regulators is at an all-time high during the announcement of merger or acquisition. Be prepared to take full advantage of this remarkable opportunity to communicate on a grand scale. Be careful of timing—in some cases, stockholders must vote before you can make an announcement. 4 5
  5. 5. Branding the Merger, Merging the Brands Regardless, keep discussions absolutely secret until you are ready to announce, and have a plan in place at all times in case of leaks. Branding the merger, merging the brands 3: Leverage the brand. When over-anxious bankers are intent on just closing the deal, Think through, and prepare, clear, concise, consistent ways to it’s not always easy to keep an eye on the brand. But the intensity communicate the business logic behind the deal to all audiences. of a merger environment can offer moments of creative brilliance if you actively consider the brand’s role in the deal. It’s common, Do not allow a communications vacuum to develop as your for example, on announcement, for the big fish to swallow the merger unfolds. Remember, this is the time to seize the day, not smaller, along with its brand. This is not always good for long- to sit back—your merger will never get more attention than at this term brand building. It can pay off to adopt one or the other of moment. Good—and timely—corporate communications will the existing corporate brands, if that brand will work hardest on influence the opinions of all constituencies. Early communications, behalf of the merged company, and accurately reflect the just after the announcement, will set the tone, create the first combined vision and intent. impression (most remembered), and pave the way for overall merger success. Sometimes, other considerations force both brands to be subsumed within a brand new one. Appoint a senior spokesperson to plant the seed of the business logic behind the merger, so you are fully understood and appreciated. Post-merger, Ciba-Geigy and Sandoz chose to call themselves Novartis, to indicate the formation of a brand new, completely The DaimlerChrysler merger established a beautifully coordinated different—and cooperative—company. Though a sound choice in corporate branding campaign from the very beginning. Every this case, it’s smart to acknowledge the loss of equity that results communication, incorporating a simple, clean, unpretentious name from walking away from old, well-established, original names, and logo, was designed specifically to support the underlying logic and to compensate for that loss. of the deal. Senior management of both companies made themselves available to the press, initiating clear and consistent On the other hand, when Novartis’ chemical business was spun ongoing media relations. The entire advertising campaign stayed off, it called itself Ciba Specialty Chemicals—retaining the old focused on the key issues and spoke cogently to all constituencies. name and adding a descriptor—it slowed the process of corporate cultural assimilation. Though the division was a big brand winner— a known entity from day one, leveraging the brand equity in a recognized name—the company had to work hard internally to get everyone on the same, new team. 6 7
  6. 6. Branding the Merger, Merging the Brands Branding the merger, merging the brands Similarly, when companies choose to combine their names in a are going to get out of it is a one-shot reduction of costs.” It’s readthrough, like DaimlerChrysler, there can be a tendency to certainly not the compelling reason needed to excite consumers retain two divergent cultures, if measures are not taken to mesh or to start building a strong new brand. them into a comfortable new whole. Obviously, there is no one “right” answer, but considering the brand’s role in the deal will guide The dealmakers at BP/Amoco, on the other hand, operating in you toward the right one for you. Remember that any choice is the same difficult world oil market, announced and negotiated bound to create its own management and communications issues, regulatory hurdles with relative ease. This merger, made between which must be carefully considered and handled. non-competitors for the good fit available, and to gain cultural advantage, offered a much better opportunity for long-term 4: Take note: bankers don’t give a hoot. brand building. About your brand, that is. Bankers are necessary, but they are focused on closing the deal, not on the long-term care and feeding of the brand—even though, in the end, the brand will 5: Create internal buy-in. A merger can be very scary for employees, who typically feel be much more valuable than the deal itself. So it’s up to you, apprehensive when they start to think about what it means for the as senior management, to defend the brand as a merger is business, and for them personally. What will our customers think? contemplated. Don’t expect that anyone else will take care of it, Will this work with our current business strategy? What about my particularly not the money people. Keep the bankers out of job? Will I have to re-locate? How will I be treated by the new brass? the communication business. And make sure the deal makes substantive sense—that it’s not simply motivated by a big number Reassuring employees, while merging two distinct cultures into that won’t sustain itself. one, are not easy tasks—they can even seem diametrically opposed. But carefully thought out and well-executed internal Merger frenzy in the oil industry offers several examples of brand communications, and the infrastructure to support the brand handling—and mishandling. over time, will pave the way. The Royal Dutch/Shell Group bankers have jumped the gun If possible, don’t let your employees find out about your merger several times, with premature announcements of pending deals from the media. Tell them yourself, through a supervisor or a that ultimately misfired. In December 1998, Reuters quoted company-wide communication, such as a personal announcement Chevron Corp’s chairman and chief executive, Kenneth Derr, who from the chairman. questioned the wisdom of a major merger “…if the only thing you 8 9
  7. 7. Branding the Merger, Merging the Brands Branding the merger, merging the brands Follow up early with a steady stream of correspondence explaining The designation of a single corporate spokesperson for both sides merger whys and hows—through newsletters, the company intranet, of a merger, indicates the spreading acceptance of consistency pay check stuffers and bulletin board notices. A few months down as critical. The “Chief Communications Officer” reports directly the line, pamphlets about brand strategy, philosophy and to the CEOs and CFOs of both merger partners, and represents communication can inspire employees to assimilate the brand, and both concurrently. Clearly, this person must enjoy universal importantly for the brand’s strength and longevity, begin to live it. credibility and the confidence of employees, customers and the financial community. Employee get-togethers create an esprit de corps between diverse groups. Think about launching the new logo with a company-wide event. Encourage periodic meetings between groups from each 7: Communicate the brand for keeps. Take the communications offensive, and control the chatter. merger partner, to identify synergies and develop processes Your competitors and the marketplace will try to define your new for working productively together. Finally, consider establishing company and its brand—don’t let them. Think carefully about the a brand council, made up of communicators from each company. first year of internal and external post-merger communications. The council’s mission: to ensure clear, consistent brand Develop a meticulous brand strategy, and support it with new communications through ongoing development and review, corporate communications that accurately represent the new and to create guidelines for universal brand communication. entity. Talk to all your constituencies, often and consistently. Plan to keep doing that for at least three to five years. 6: Avoid the schizophrenic brand. Consistency is key to building brand credibility. Be sure to When Bell Labs spun off from AT&T, it was one of the most widely coordinate communications, so that one merger partner does not held stocks in the world. Though many might have sat on their unintentionally contradict the other. Ultimately, this contradiction laurels, Bell Labs chose to create a new name and to launch an requires both to modify their positions—causing irreparable entirely new brand, investing significantly in that branding effort. damage. Inconsistency destroys existing brand power, confuses Today, Lucent Technologies has a larger market cap than its employees and consumers, worries shareholders and potential former parent, AT&T. Supporting the brand was not only investors. Allow it, and count on starting from square one in courageous—it was very smart business. terms of building brand. 10 11
  8. 8. Branding the Merger, Merging the Brands 8: Think global, act global. The Right Communications Partner The world just keeps getting smaller, which will profoundly affect If you want to fully exploit initial interest in your new brand, and mergers and acquisitions. The Euro will ease, and ultimately showcase it as it matures, you’ll want to take full advantage of eliminate, many currency issues. Companies will list on stock carefully considered opportunities for media placement. Any mention markets worldwide with greater and greater regularity. Online of the brand, whether in an ad or editorial, is important in reaching stock trading will become standard operating procedure. Mergers the maximum number of potential customers, as well as those who will include global combinations that few would have believed might influence your corporate reputation. possible until very recently. The lesson here: Consider, and heed, the global impact and implications of every single communication. Brand builders must educate and communicate with decision makers —those individuals in top management who make the administrative Deutsche Bank’s takeover of Bankers Trust, the Hoechst/Rhône- and buying choices. These are the people who read Business Week. Poulenc and Daimler/Chrysler mergers, and LG Electronics’ Simply put, Business Week is read by more business professionals acquisition of Zenith all reflect the new global merger mentality. than any other business publication in the world, which makes it the It’s a new kind of global thinking about business…a world without ideal place to introduce and nurture your new brand in print. preconceived ideas…a world without barriers. The major players who choose Business Week as an advertising venue and a source of information, are evident in Business Week’s Work the Brand so the Merger Works Awards of Excellence in Corporate Advertising, a list which, since The branding opportunities—and challenges—offered by a merger are given on the basis of independently gathered advertising or acquisition are tremendous. There is significant—often dramatic readership scores, and create another tool with which companies —change present. People are paying attention. Employees are can gauge the effectiveness of their anxious about their futures. The financial community wants to branding efforts. For further know how the business will grow. Customers are watching, and information about the awards or so are competitors. advertising in Business Week, 1985, has recognized outstanding corporate campaigns. Awards please contact Bill Kupper, The cost to brand a merger the right way is not much more than Business Week’s Associate a decimal point on the deal. The potential returns are enormous. Publisher, Worldwide Sales Take full advantage of the momentum and possibilities an M&A Director at (212) 512-6945. can bring to a brand. Your bottom line will thank you for it. 12
  9. 9. Jim Gregory Based in Stamford, Connecticut, Corporate Branding, LLC, is a highly specialized global communications consultancy that works with advertisers and agencies to measure and leverage companies’ corporate brands with key audiences. Their breakthrough work in analyzing the return-on-investment (ROI) for corporate advertising is changing the perception of advertising by senior management of companies around the world. Once thought of as an expense, corporate advertising is now considered an investment that can have predictable returns. Jim Gregory, founder and CEO of Corporate Branding, has authored two books on the subject of corporate advertising, Marketing Corporate Image and Leveraging the Corporate Brand. He is currently working on a third book on the subject, Communicating Leadership in Business. He has also authored numerous published studies on corporate branding, including The Impact of Advertising on Stock Performance, published by the Association of American Advertising Agencies (AAAA), Trends in Corporate Advertising, published by the Association of National Advertisers (ANA), and his company’s publication, Q&A on Corporate Branding: Answers to the CEO’s Toughest Questions. Branding the Merger, Merging the Brands is the fourth in a series of brochures by Business Week and Jim Gregory. The other brochures in the series are entitled The Impact of Advertising on Brand Momentum, The Impact of Advertising on Brand Power and The Impact of Advertising to the Financial Community. If you need additional information on this series, or would like extra copies of any of the brochures, please contact Bill Kupper, Business Week’s Associate Publisher, Worldwide Sales Director at (212) 512- 6945. © 1999 Corporate Branding, LLC, Stamford, CT 06902