Branding a key factor for M&A deals


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Branding a key factor for M&A deals

  1. 1. Branding a keyfactor for merge &acquisitions deals
  2. 2. Branding a key factor for merge & acquisitions dealshe Great Merger Movement" spanned a decade ofmajor consolidations in the United States, from 1895through 1905. A notion of its scale may be gained fromthe fact that companies acquired in mergers in 1900were worth around 20% of GDP. More than a centurylater, unsurprisingly, Brazil is undergoing its ownprocess of major consolidation. Whether this is just thebeginning of it, or the middle, or the end, is not known.However, one thing is certain, from the perspective of thebrands involved nothing will remain unchanged and asconsumers we will have to get used to letting go. SeveralVarigs will vanish, many Telco’s will be transformed,and various new BRFS and AMBEVs will emerge. Someof these processes will be developed more strategicallyrather than being rushed through, others less so.Over the last 5 years, branding consultants have beenasked to take part in major consolidation processes.In most cases, we are called in after agreementshave been signed and announced to the marketbecause branding is rarely deployed as a key tool atthe negotiating table from the outset, despite itsbeing seen as a strategic asset for the business.While companies do understand that their brandsare more than just names or logos, many are notsure how their brands can actually become livebusiness assets capable of generating identification,differentiation and value. In this respect, matterssuch as portfolio strategy, creating unique culture,and defining corporate citizenship platforms formerged companies have become branding issues.In the heated atmosphere of an ongoing merger, abranding project always sets out to convey the bestmessage to key stakeholders. There may be manyvariables given a record of equities built up by two ormore brands, but if there is no one single solution,then defining criteria for decision making will becomeincreasingly complex. On top of this is the fact that thebusiness strategy has not always been consolidated.The important point is to decide what to retain, what tojoin, what to drop, and what has to be created startingfrom scratch. Assuming that an understanding ofsynergies and complementarities will at the very leastmean examining the name, symbol, visual identity,culture and communication of those involved, it iseasy to see that a project like this requires dedicatedresources and plenty of highly flexible resourcefulness.Finding a clear definition that points to one single wayforward is important - not least because the idea is toavoid losing value while definitions are being discussed.The impression is that competitors will always changeup to play a faster and more assertive game when a bigdeal goes through. They will seize the "opportunity" toreposition or invest more. Plain action and reaction.Soothing nerves and controlling the process ofengagement to get decisions communicated internallyfirst is always a challenge. Obviously no employee likesto see the news first in a newspaper reporting that thebrand they have worked for over many years will begone, or become something that has no meaning forBranding a key factor formerge & acquisitions deals"
  3. 3. 4Branding a key factor for merge & acquisitions dealsthem. However, many companieswill not even start thinking aboutit until after the effects of anannouncement have been felt.Measuring the economic impact ofthe alternatives under discussionis quite a complex task too,especially for brands operatingon a global scale. It can cost overa million dollars just to registera brand name with regulatorsin several countries for differentproduct classes. So carrying outa transition plan to change oneor more brands at numerouspoints of contact is a significantinvestment, especially for consumer-facing industries with gondolas,packaging, fleets of vehicles andcommunication. Moreover, wedo not believe that quantitativesurvey statistics alone can measurea consumer’s willingness to let goof a brand, or move on to another.Unlike other countries, the situationin Brazil was that companieswere allowed to announce merge& acquisitions proposals beforeobtaining full authorization fromthe antitrust agency (local acronymCADE). The waiting process tookup to 2 years and it was hard toknow what could or should be builtin the meantime. In this context,many corporate names becamebrand names. Recently, newantitrust legislation in the formof Law No. 12,529 took the placeof the previous Law No. 8,884.Major alterations include a systemfor prior notification of merge &acquistions deals and approvalfrom CADE. This poses a greatopportunity for the "new" brandsto start communicating with theiremployees, customers and investorsright from the start. The questionis to what extent this process willbe followed by companies and howthe inputs or resources needed willbe allocated at a stage when theparties involved are still "lookingat each other" and not necessarilyfeeling part of the same team.In the hot-house process ofsearching for an identity, strategyfalls by the wayside. Ironically, anarrow or blinkered view of a brand- as just a name plus logo - oftenemerges from hastily organizeddue diligence meetings held tocomply with initial obligations.Going the right way about creatinga name has to be one of the mostcomplex of processes because itinvolves a collective exercise thatis often abstract. When it comesdown to "Like it" or "Dont like it",logic tends to lose out to emotion.In short, the branding issue, whichoften seems simple in the eyes ofactors holding complex negotiationsbetween the parties involved, maybecome even more complex ifignored. But despite all the issuesinvolved, if we could give just onepiece of advice to those working ona project for a brand undergoingconsolidation, we would say that themost important thing is to avoid theperception that there are winnersand losers. This alone can minimallyadd to the chances of a successfulbrand coming out of a merger.Paulista avenueWhen it comes downto "Like it" or "Dontlike it",logic tends tolose out to emotion.Some points to watchfor on the road toconsolidation:When business strategyhas yet to be definedIn a rush, a corporate namebecomes a brand nameWhen the role of stock ownershipis ignored in brand buildingCapital market a keytarget for brandingInternal resistancemust be crushed When a brand is boughtfrom a founderBrazilian brands goshopping abroadWhen it’s time todeconsolidate,reorganize brandsWhen verbal and visualidentities build a bridge betweenrational and emotionalCorporate citizenship ispart of the package too
  4. 4. 6Branding a key factor for merge & acquisitions dealse are longstanding advocatesof brand strategy as a directreflection of business strategy.However, there are some situationsin which brand strategy has to bebuilt even before business strategyis consolidated, or even defined.Due to legal restrictions on theuse of a brand, or the need toannounce a merger and acquisitionto the market, executives often findthemselves facing the challengeof taking quick decisions ontheir brand without being sureof a solid basis for the business,which may seem like taking ahuge leap without a safety net.The new anti-trust legislation,with CADE introducing tougherrequirement for its analyses, led toa tsunami of merge & acquisitiondeals in the last fortnight of May thisyear, prompting many companiesto speed up negotiations. Hencethe brand strategy questions thatcame up for these companies afterthey made an announcement tothe market: what will Diageo dowith the Ypióca brand? Will therebe a change in its positioning? Or itsvisual identity? What will come outof the Azul - Trip deal? A new brand?Will they retain their current brands?Obviously, questions like these arejust part of a whole complex thathas to be assessed. Nevertheless,brand strategy is perhaps the mostvisible aspect for customers buyingthese brands, the one that has mosteffect on employee engagement,and the one that signals changemore tangibly for other parties,such as the capital market.When business strategyhas yet to be defined1At this point, a crucial move isto build the new strategy on thebasis of the most deeply rootedand differentiating values ofeach company in the case ofa merger, or to show respectfor the culture of the acquiredcompany and get leverage fromit, in the case of an acquisition. Insuch a messy and risky scenario,the best alternative is often todefine what you NOT want forthe brand, and on that basissee what territories the brandcan take over in order to ensuredifferentiation in the marketplace.Supposing this solution may betemporary and that brand strategywill deepen as the businessconsolidates, a very importantpoint is not letting competitorsin on future moves, or spendinga lot of time and resources ontransition scenarios. The idea isto get out a rapid response forthe brand in the marketplace,while retaining the ability toadjust its course in the future.Although there are several pointsto watch, experience shows thatthere are a lot of positive factors forbuilding brand strategy in a scenarioof business strategy being defined.Often, when strategy has yet to getpast the stage of putting togetherPowerPoint presentations witha firm of business consultants, aquestion as simple as Which branddo we put on our business card?"becomes a major point for discussion- and in many cases, for sure, will leadto business strategy being revised.In addition,building brand strategyhas a fundamental impact on seniormanagements engagement withgoals and targets and may also bean important way of firing up staffto work for goals and targets.In such a messy andrisky scenario,the bestalternative is often todefine what you NOTwant for the brand.
  5. 5. 8Branding a key factor for merge & acquisitions dealshen branding and businessstrategies are being developed at thesame time, one of the most commonmistakes we have seen is the name ofthe new corporate entity becominga new corporate brand too. Oftenracing the clock to meet legalrequirements, the corporate nameeventually takes on a role that goesbeyond contractual wording andalmost empirically starts to take onthe responsibility for communicatingwith internal and external audiences.This is a high-risk situation, sincethe corporate name invariably hasno real content, nor does it containa definite or differentiated message.From the internal point of view,it can generate noise in a periodalready fraught with uncertainty,layoffs and structural adjustments.From the external point of view,raising the status of a corporate nameto that of a corporate brand can getin the way of the process of buildingbrand strategy.You often hear peopleexplaining the problem like this:" it wasnot really the brand we preferred,itcame out of a meeting [or we alreadyhad the name registered] but sinceso much work had been done andso much money had been invested,this is what we are left with",whichshows that the problem was dealtwith but nobody thought it throughproperly. Not to mention the obviouswaste of resources on buildingsomething that is not going to last.In a rush,a corporatename becomesa brand nameFrom the external pointof view,raising the statusof a corporate nameto that of a corporatebrand can get in theway of the process ofbuilding brand strategy.The brand equation2Brahma and Antarctica, Sadia and Perdigão, Itaú and Unibanco, Santander and Banco Real, Fibria and VCP Aracruz,Nestlé and Garoto, TAM and LAN, Brasil Telecom and Oi, Casas Bahia and Grupo Pão de Açúcar
  6. 6. 10eyes of industry analysts is nowtracked by a much larger groupof stakeholders. This directlyaffects brand perception amongcustomers and consumers who areincreasingly looking at companiesorigins and developments inrelation to corporate citizenship.The question is often asked duringa consolidation process: to whatextent is it good or bad to havethe corporate brand endorsedby its shareholders brands? Untilrecently, the corporate brand wasthe "mother brand" that endorsedand contributed value to the otherportfolio brands.On that basis,portfolio architecture and strategywas built.Today,when this brand hasone or more shareholders,it is crucialto see whether these endorsementswill benefit the portfolio or not.Add tothat the task of analyzing these brandsprofiles, cultures,and especiallyimages and reputations.You can nolonger build a corporate brand andsee how it relates to other brands inyour portfolio without looking at thelatters relationship with controlling orco.parent brands.The guiding threadused to help a business build its ownculture must at the same time beincreasingly consistent and flexibleif its brands proposals are to hold up.rom the internal point of view,defining instances for approvalby shareholder or companiesholding a stake in the businessis an important factor affectingthe way a brand project movesforward. These stakeholders must beinvolved right from the outset of theproject in order to ensure positiveresults and the backing neededfor the CEO, who may not alwaysbe able to rely on the support of afunctioning executive committee.Major conglomerates increasinglyown numerous companies thatmay be business partners or maybe competing among themselves.In this scenario, a brands stockownership structure and itsrelationship with the controllingportfolio are increasingly mattersfor concern and analysis forbrand managers. A relationshipthat was previously restricted toshareholders and the watchfulWhen the role of stockownership is ignoredin brand buildingToday,when thisbrand has one or moreshareholders,it iscrucial to see whetherthese endorsementswill benefit theportfolio or not.3
  7. 7. Branding a key factor for merge & acquisitions dealsmong the key stakeholdersaround brand building is the capitalmarket, both analysts and theinvesting public in the form of big,medium and small shareholders[the latter having even more impact,since their behavior is individual,like these brands consumers].In this respect, brand strategybecomes a means of communicatingand tangibilizing changes, andfor showing real evidence thatthe company is implementingits business strategy. As a resultof this, branding projects areincreasingly involving majorinvestment banks and shareholders.Many of the business strategyadjustments that instigateconsolidations come from pressureto boost market value. Given thatbrand value is a significant part ofa companys net worth, workingwith this percentage value toboost the absolute number isessential for a company to getbetter market valuations.Averaging the worlds most valuablebrands on Interbrands ranking,brand value may reach 40% of acompanys net worth. But this is notthe case for B2B markets, in whichtangible assets predominate in thetotal value of a business. On the onehand, this is a challenge for brandmanagers struggling to boost theirsignificance for the company, on theother it poses an opportunity for acompany to build a single promisewith much less investment.Strong brands with a consistentrecord of delivering what theypromise will get better results- due to their consumer loyaltyor preference, or higher levels ofemployee engagement boostingtheir productivity. Nevertheless,many companies are unable to tellthe difference between adjustingbrand strategy and retouching visualidentity or changing a name. If thesecosmetic adjustments do not cometogether with real change in thecompany and its delivery, they mayyet have positive impact in the veryshort term. However, in the long run,the market will inevitably penalizethese companies with projectionslower than before their brand change.Therefore, brands concerned toconsistently meet capital marketexpectations tend to post evenmore positive results and earn morepreference in investors minds,which is extremely relevant at atime when a culture of investingin capital markets is taking shapein Brazil and foreign investors arelooking at opportunities here.4Brand valuemay reach 40%of a companysnet worth.Capital market a keytarget for branding
  8. 8. 14Branding a key factor for merge & acquisitions dealsuite often, when a businesshas grown and is ready to go througha process of consolidation, someonesays it is "looking for a bride to marry."Everyone gets ready for a party onthe big day when CADE authorizesthe deal - and for the honeymoonwhen the numbers for the joint effortare announced. However, thesedeals are also like weddings in thesense that the story starts with along list of challenges to be tackled.One of the biggest problems is thatstrategies are normally devisedand agreed to on the basis of costsavings or synergies in the market,thus leaving out people and culturalissues. Normally, when party day hasbeen marked on the calendar, it isbecause the two sides have reacheda consensus and know what theywant for the future. The importantpoint here is that the fact of reachingthis convergence in a business-like fashion does not necessarilymean they will be soul mates.Just like weddings, mergers requireplanning and agreement betweenparties. Can you imagine gettingmarried to someone you do notknow well? Who does not sharethe same values? Or whose aimsin life are quite unlike your own?Of all the assets in play during amerger or acquisition, the one thatshould be watched most closelyis brand culture. The challenge ofcapturing this intangible valueduring the process - and boostingit - is extremely underestimatedand poorly understood.Over the last few decades, we haveseen several marriages that wereunexpected given the history of thebrands involved and their cultures.The latest case of this type was theSadia - Perdigao deal. Both marketleaders, direct competitors investingheavily in frontline retailing, bothwith the main objective of beatingeach others sales numbers. Toachieve their goals, each createdtheir own culture in the race forcustomer preference. One moreaggressive more focused on numbersand results; the other lighter on thatside but more concerned to buildcloser relations with customers bybuilding personal links. There was noright or wrong: the important pointwas that staff felt proud of being ontheir team, and they saw the rivalcompany as their chief adversary.BRF - the company resulting fromthis deal - started off on the rightroad.Luiz Fernando Furlan,one ofthe leaders involved,showed thatstrategy for unifying cultures wason the agenda during the planningperiod when he said "We arepreparing to be missionaries in orderto truly unify the two companies" [Gazeta Mercantil,2009].When cultures are being integrated,brand strategy can be of greatassistance. Since the first stepstaken by "consolidators" involvelegal, financial and administrativeissues, the chances are you will findthat people are badly informed anddissatisfied, not knowing exactlywhere to go and how to act.The first major challenge, which isnot at all easy, but which helps alot during a transition is to assurepeople that the deal is being handledwell and carefully. That there arepeople keeping a close watch oneach legacy asset, and that changeswill be made at the right time and inthe best way for everyone concerned.By officially notifying decisions to theinternal public, management gets astrategic opportunity to minimizenoise and establish a relationshipof trust and transparency whileallaying concerns over decisionsthat have yet to be made.Internal resistancemust be crushed 5Strong brands,whichstay consistent withtheir promises anddeliverances,achievebetter results.The new brands promise does nothave to be the exact sum of each ofthe parts.Understanding synergiesand complementarities between twobusinesses and their brands helps tofoster awareness,lower anxiety levelsfor the internal public,and stimulatea new landscape for innovation.This new scenario may be biggerby combining the best from bothcompanies into something new thatinspires and motivates their teams,who now have their first shared goal.Branding is neutral territory forsettling disagreements and theanalyses involved are not as cut-and-dried as business strategy.Ultimately,a company consists ofits people.It is their reaction thatwill determine the success of theoperation.And is branding that willget them passionate about a new idea,and work hard for the new team.The path of discovery
  9. 9. 16Branding a key factor for merge & acquisitions dealsWhen a brand is boughtfrom a founderThe good news is that in cases ofnatural alignment with philosophiesconverging, the corporate citizenshipplatform in the consolidated scenariowill show gains in terms of robustnessand visibility. In the case of the Itaú-Unibanco merger, for example, therewas a chain of movie theaters - anemblematic initiative that had beentaken by Unibanco. This issue wasthe picked up on brand managementradar and the name of the movietheaters changed from EspaçoUnibanco de Cinema to EspaçoItaú de Cinema. At the same time,the experience of these venues wasaligned with Itaús brand identitywithout the losing the DNA or identityof an extremely significant culturalplatform - and one totally in line withthe banks whole style and approach.Interbrands work in recent yearshas included an integrated approachto these assets. Our attempt toinvolve brand managers and thoseresponsible for corporate citizeninitiatives and their platformsbore fruit immediately in theform of the level of engagementof staff in the new companiesand faster development ofpost-merger strategies.ince branding is a relativelynew discipline to be seated at thenegotiating table for mergers andacquisitions, corporate citizenshipplatforms and sponsorship fromcompanies that do much to helpbuild them, are seldom seen as keyassets for the process. Nobody willforget how hard Banco Real workedto build its sustainability platform.But can anyone tell us how muchof this effort was inherited by theSantander brand after the merger?Initiatives taken by brands, theirfoundations or associations, willoften end up being left out of apackage or being reduced to merelysecondary considerations. Thismay happen for reasons rangingfrom legal agreements and stockownership issues at the timeof consolidation to challengesconcerning the legitimacy of theseinitiatives and corporate citizenshipplatforms in the new contextof the two corporate culturesbeing joined. During a phase ofphilosophical misalignment, soto speak, this agenda may bebackgrounded by major businessdecisions or other expressions seenas more critical for the brand.Corporate citizenship ispart of the package too6n the process of devisingstrategy and building identity forconsolidation, showing respectfor the origins and legacy of eachbrand involved is a matter ofsurvival. Stories and values are oftenembodied or personified in the figureof a great founder or manager. Sothe question is how to maintainand respect equities that have beenbuilt in the past when the newcontext is a fundamental changein the dynamics of the business?Owner-managed companieswill often become professionallymanaged companies. In thesecases, even if the "owner" stays onas an executive, the dynamics ofthe business, the ways of applyingpressure to meet targets andmanagement style will go througha process of being "impersonalized",which may be very good or verybad for the people charged withbuilding a new brand. Employeesare often unable to differentiatethe brand they work for from thebrand of the entrepreneur whofounded the company. Worse yet,the entrepreneur himself, normallyresponsible for the "sale" of acertain operation, often remainsattached to his own way of doingthings, making it hard to introducenew rules and engage his formeremployees with them. In these cases,the entrepreneur must be involvedin creating the new brand strategyand acting as an advocate of the newdynamics, the new business, and thenew brand, showing employees thatthe origin of it all will be respected,but changes are needed to buildsomething bigger - a new paradigm.In many cases, these dynamics forbuilding brand strategy in a merger/ acquisition involve the families ofshareholders and / or the foundersof the original companies. Even ifthese bodies have vote or veto, theywill invariably get involved in brandstrategy issues as spokespersons orsupporters of something that goesbeyond the business itself. A legacy isoften passed down for generations,and it now has to be seen in the lightof the new dynamic. It would be usefulto have an almost archaeologicalstudy of the dynamics and institutionsthat helped build the brands involved,so that the new brand will not be"insensitive" by making its appearancein the market before taking stockof these inputs for the process.7
  10. 10. 18Branding a key factor for merge & acquisitions dealsor companies aiming to growthrough mergers and acquisitions,shopping around in Brazil hasgotten too expensive, and it is nolonger so easy. So top Brazilianbrands started looking to foreignmarkets, which posed newchallenges and very differentscenarios in relation to situationsthey are accustomed to locally.Brazilian brands buying upoperations in other countries haveto tackle two major challenges.One is to internationalize andtranslate their way of doing thingsfor operations and behaviorsin different places, not only forbusiness matters as such, but also byimmersing themselves in differentcultures, histories, legislation,behaviors and needs. The otherchallenge is to learn how to be aparent company, a leader that comesin with a well thought-out brandmanagement proposal and a long-term approach to the local scenario.Historically, Brazil has been a land ofopportunity for international majorsand brands eager for new businessand bigger profits. We have beenformatted to adapt to the statusof being a colony for many decades,working for objectives decidedelsewhere, and tropicalizing brandstrategies without asking too manyawkward questions or raising ourvoice. Over time, we have learnedfrom people in the know and at thesame we have been building up ourown DNA. Now, we have to takewhat we have learned and put it intopractice by dealing the pack andmaking the rules for own game.Brazilian managers going toother countries to take over acompany and its brand are takingon a big role. A constructive way ofBudweiserBrazilian brands goshopping abroad8Historically,Brazilhas been a landof opportunity forinternational majorsand brands eagerfor new businessand bigger profits.positioning for a newcomer in thiscontext is to be transparent andobjective from the outset by tellingpeople what is going to happenduring the transition. To make asuccessful entrance, it helps toshow perspective and signal a long-term commitment, thus dilutingemployees’ fear of seeing their branddisappear as soon as the new leaderhas made himself at home there.Brazilians doing merge & acquisitionsdeals in other countries have inmany cases started by retaining localbrands,apart from parent brandaspects and the operation itself.Itseems that changes are not madedue to fear and insecurity,since weare new on the international scene.But we have seen the opposite too,with brands being chopped in a rush,without thinking it through,in orderto channel efforts into business andmanagement issues.Whatever thecourse decided,any scenario forcoexistence between brands requiresactive management from day one - ifonly to mitigate risks and controlcritical situations in the medium term.The recent example of ABInBev buyingBudweiser in the United States isemblematic of a situation that hasstood out for causing unease andantipathy toward the lead company.A tactless approach to the legacyof the Anheuser-Busch brand -an American cultural icon - ledto a liability that will be hard tosettle. On arriving in America,ABInBev imposed its own style ofmanagement culture on executivesand particularly a local communitywhose lives have been linked to thecompany for decades. In a countrylike the United States, where peoplemobilize around issues that triggerstrong nationalist sentiment, themarkets quick-fire response maywell be echoed in financial numbers.The lesson to be learned fromstories like this is that the newleader in a business may well meetwith rejection and distrust. Merelyexporting our set of tools, processesand ideas that shaped a successfulbrand in Brazil will not ensure thatsynergies are tapped in the newmarket. This applies across theboard, from brand strategy andmanagement to internal culture,communication, business practicesand employee engagement.
  11. 11. 20Branding a key factor for merge & acquisitions dealswith new courses such as journalismand advertising to extend its scopebeyond business management,whereas the nonprofit Ibmec SãoPaulo preferred a focus on businessand economics. Under independentmanagements and different groups,the two operations little in commonbeyond the name and logo - whichno longer characterized the samebrand.The process of separatingbrands and defining a new one[Insper] for the institution in SãoPaulo took a year and migrationis still underway, while the Ibmecbrand [now identifying only theoriginal Rio de Janeiro operation]has not entered São Paulo.Theinvolvement of students and facultyInsper throughout the periodof building this new brand wasnot always fluid, but it proved animportant point: a great brand canand should always go back to itsDNA, its defining features. Revivingand revising its real vocation to thenembark on a more coherent processof reorganization, strengtheningits ways of communicating andbeing perceived in the proposednew brand scenario. In this case, thepointer to its origin was preserved,and transition took place naturally.he urge to grow, gainmarket share and boost revenuemay be taken as "the" reason forconsolidating, but business unitsand their brands may be wound upor hived off too, and for the verysame reasons. Roughly speaking, thisfragmentation scenario arises frombusiness strategy adjustments - theend of a joint venture, for example, ora decision to specialize, or an offeringnow seen as differentiated and havingdeveloped into a major generator ofvalue and financial results, or simplythe absence of chemistry betweenvery different kinds of operations,cultures and proposals.Technicallythis is part of the job of organizingand managing a brand portfolio.A split means that two playersgo back to running their ownoperations, so several questionsare posed: who gets the brand forthe integrated operations? Howcan employee motivation andcommitment be maintained?How can the advantages ofsplitting be communicatedwhile preserving the past of thisbusiness and its brand equities?An interesting case in this respectis a Brazilian business school calledInsper.Around three years ago, twooperations lined up under the Ibmecbrand started to travel separate roads- including in the geographical sensetoo.The Rio de Janeiro based Ibmecfor-profit operation was growingits education portfolio horizontallyWhen it’s time to deconsolidate,reorganize brands9 10he classic issue of which logoremains after a consolidation startsto cause tension to the extent that adate for the official announcementof the deal comes nearer and notinfrequently the market findsmeaningless acronyms and symbols.There are a few options, such asmaintaining one of the identities,combining both, or creating a totallynew one. However, this decisionoften boils down to purely emotionalissues. The fact of not knowingwhich "little brand" will be on anew business card triggers a realidentity crisis in most companies.And it is just the beginning ofa much deeper problem.Obviously a name or a logo initself will not be able to transforma new company, but in fact theyWhen verbal and visualidentities build a bridgebetween rationaland emotionalare tangible symbols of the timeof joining forces. They take on therole of the greatest representativesof new ideas too. Few companiesrealize that at this time there is avaluable opportunity to evolve, toreconnect with their employees andsociety – by wearing new clothes.To take one example, does anybodyremember that Banco Itaú wasnot originally called Itaú? Or that ithas not always been represented byits "blue biscuit"? The bank startedlife as Banco Central de Créditoand became Banco Federal deCrédito in 1943. It was not untilthe 1960s, several mergers later,that it took the name of Itaú.Insper
  12. 12. 22Branding a key factor for merge & acquisitions dealsn beginning an identityproject for a merger or acquisition,as is the case for brand strategyprojects, we must first of all see whatthe identities involved have in termsof positive equities and weaknesses.As in any process of change, we stackup the good things on one side, andthe rest, which is no longer usefulis discarded or sent for recycling.The stack of positive equities isthe one that points toward thefuture. New opportunities will arisefrom it to define the identity beingbuilt - but the creative process isguided by brand strategy. Thereis no way of assessing whethera name or logo is right withouthaving a clear notion of what thecompany wants to build with itsbrand. To see how a company isgoing to dress or talk, we must firstlearn about its personality, who itwants to be, what its characteristicsand differentials or edges are.Since a brand is the outcome of achain of experiences, the role ofdesign is to create a guiding threadacross these experiences. It does notmatter whether we are talking abouta color palette, stationery, packagingor a physical space: it is through thedesign present in every experiencethat we interact with brands.In the process of creating newidentity for Alpargatas, for example,the logo was the cherry on the cakeof attitudinal change that has beentaking place in recent years. Duringthis period, Alpargatas built aunique multicultural, multi-brand,multi-national identity that putan end to a longstanding processof separate operations in Braziland Argentina. Where before therewere companies with completelydifferent logos and identities,today there is a single brand.When there is a consolidation, itdoes not always need a new logoor new name. The Itaú - Unibancomerger involved enormouschallenges. All the scenarios wereexhaustively examined in order todecide on a symbol for the sum ofthese two great financial fortresses.The answer as to how to incorporateelements from both banks identitiesin one single system did not comeas a new logo or a new name, buta new palette of colors, symbols,icons, product names, and otherelements, anchored on the use oforange as the guiding thread.When there is a merger oracquisition, the resulting companyis repositioned on another level. Inthis context, qualitatively investingto build its identity is crucial togenerate the right public perceptionsof what this brand wants tocommunicate. It is vital to bear inmind that the main role of design isto transform perceptions into reality.Today, strong and admiredbrands pose various lessonsin this respect by creating andsustaining business culturesincreasingly guided by design.In their universes, each pointof contact becomes a uniqueexperience, capable of earningthe loyalty of the target audienceand continually reachingbetter financial results.This is how Coca Cola delivershappiness. This is how the Brazilianmarket recognized the value ofKorean cars, thus underminingpast prejudices and gainingvalue for their brand equities.evising a perfect name is noteasy: it must be able to representwhat the new company standsfor. It must be inspiring, easy tocommunicate, and capable of beingregistered intellectual property forclassifications and in countries ofinterest for the company. To getsome idea of what this means, bythe turn of the millennium, some2 million brands a year were beingregistered in the European Union.In a consolidation process, a newname is needed when previousidentities are no longer able torepresent the new offer, or thenew period, for legal or strategicreasons. The name will be the firsttrace of an emerging identity; itwill set the tone, steer a course,and lead to (or fail to lead to) aninitial favorable impression.In the case of the Votorantim- Aracruz merger [both pulpand paper makers], we decidedto create a new global name.Here were two relatively youngcompanies compared to the otherplayers, facing the challengeof joining the forces of theiremployees and building the worldslargest hardwood pulp maker.The grit and focus in the DNAof the merged company, whichhas now taken over as industryleader, combined with the "pulpfiber" products origin, were theinspiration for the name Fibria,which now represents andsustains global leadership in itsbusiness for a firm of genuinelyBrazilian origin and capital.So what aboutthe name?Putting thehouse in orderA new name is neededwhen previousidentities are no longerable to representthe new offer,orthe new period.
  13. 13. 24Branding a key factor for merge & acquisitions dealshe new antitrust law (LawNo.12529/2011), which has beenin effect since May 29, significantlyalters the procedure for submittingapplications to the anti-trust agency(Administrative Council for EconomicDefense, or CADE).These alterationsaffect the merge & acquisitions marketin Brazil and companies are advisedto take certain precautions that werepreviously secondary or dispensable.Under the new law, CADE must nowbe notified if a deal involves "economicconcentration" and certain levels ofrevenue.An "act of concentration"occurs if a transaction involvesacquisition of equity interests, settingup a joint venture, or the acquisitionof assets (including brands), amongother conditions.Transactions mustbe submitted to CADE whenever theyinvolve an economic conglomeratethat has posted gross annual revenuesof R$ 750 million or more with at leastone other conglomerate that hasposted gross revenue of R$ 75 millionin Brazil in the year prior to the deal.The new law has adopted a systemof prior analysis of mergers ("actsof concentration") and parties mayThe new antitrust law and precautionsfor merge & acquisitons dealsnot close a deal before gettingCADE authorization.There are twoconsequences arising from theabove.The most obvious one isthat getting the antitrust agencysapproval - which may take anythingfrom 3 weeks to 330 days - will nowbe a preceding condition before atransaction is concluded.The othereffect, which poses greater practicaldifficulties,is the obligation to avoidso-called gun jumping by preservingthe independence of the companiesinvolved until CADEs decision,sincethe law prohibits transfer of assets,or exercise of any kind of influenceby one party over the other,orexchanging sensitive informationbeyond a reasonable limit.Companies that fail to comply withthese obligations will be subjectto severe penalties,including finesranging from R$ 60,000 to R$ 60million, the transaction being declaredannulled, and an investigationinto anticompetitive conduct.In this context,there are certainprecaution that should be takenby companies involved in merge& acquisitions transactions,By lawyers Machado Meyer Sendacz Opiceespecially those with competitorsor parties potentially integratedas suppliers or distributors.Firstly,companies are advised to makea preliminary assessment of the anti-trust risk involved in a transaction.This measure is an important factorsteering negotiations on contractualterms and even for defining acquisitionprice.For a seller,accepting a lower bidin a deal that will tend to get approvalfrom CADE quickly and unconditionallymay be more advantageous thanholding out for a higher price fromanother deal that might involveproblems with the agency.In addition,parties should negotiatespecific clauses to protect theirinterests.In this respect,a seller maystipulate a deadline ("drop-dead" or“longstop” date) for CADE approval,afterwhich the contract may be canceledwithout onus or fees.They should agreeon protective mechanisms in the eventof CADE rejecting the transaction,including payment of compensationby the buyer,or compelling a partyto adopt any measure capable ofaddressing competition concernsidentified in order to obtain CADEapproval,such as selling off stakesin other companies or assets (hell orhigh water clauses).On the otherhand,a buyer may demand controlover the process in relation to CADE,to delimit acceptable restrictionsand stipulate the possibility ofpulling out of the deal or lowering itsprice if an unacceptable restrictionis being posed - such as selling offa particular brand of the acquiredcompany to a third party.In order to avoid gun jumpingrisk,the parties should set rulesfor the flow of information betweenthem through to closeout date;stipulate confidentiality obligations;and regulate their behavior in relationto customers,suppliers and otherpartners during the transition period.Finally,an important point to note is thatthe need to preserve the independenceof the parties does not prevent a buyerfrom negotiating guarantees in itsfavor,such as the sellers obligationto maintain the normal course ofbusiness,preserve assets,businessrelationships,and key employees,andrefrain from taking on debt above acertain level, among other items.Negotiating contractual clauses ofthis nature is already part of merge& acquisitions practices in countriesthat adopted prior antitrust approvalprocedures in the past, and this typeof negotiation is essential to avoidsurprises that may adversely affectthe outcome of the transaction.Theadequacy and efficacy of these clauseswill largely depend on the experienceof the parties attorneys in corporateand antitrust areas of practice.The merging processBefore the antitrust lawMergerMergerAnnouncementAnnouncementCADECADENowMARCABRAND
  14. 14. 26Institutional support byContact usInterbrand do BrasilPhone +55 11 3707 8500interbrand.sp@interbrand.comFor further information on started its activities in 1974, when the world still thought of abrand as only a synonym to logo and name. There are currently 36 officesworldwide and a highly qualified team of professionals, who make ourbusiness rigorously detailed and creative.We create and manage brand value, putting it in the middle of the strategictargets of the business. We combine pioneering and practice in the brandingdiscipline with creativity and ability to innovate, in all the life cycles of a brand.Brand StrategyThe brand strategy work requiresintense partnership. Our team worksalong with the clients to identifymarket opportunities and help themto position their brands, thinkingof short and long term strategies.To do so, we carry out data analysisthat involves quantitative aspectsas well as the identification andmapping of functional, inspirationaland aspirational benefits of a brand.The brand strategy involves severalsubjects and expertise, from brands’architecture and position to theengagement of collaborators.Actuation areasBrand IdentityA well-defined brand identity is apowerful communication tool, whichgoes beyond the identification ofa business or organization. It is anendorsement of quality, value andtrust. It promotes understandingand distinguishes companies fromproducts for the consumers.We understand brand identityas the reflection of its strategyin aspects that are visible in theeveryday routine, such as thename, the tone of voice usedin communication, logo, stationery,packaging and the other points ofcontact where the brand is present.Brands’ AssessmentThe assessment aims to understandthe financial value of a brand andhow to increase the role it plays togenerate measurable impacts.It is through an assessment work thatcompanies can have a more specificdimension of how much brands canpositively impact on their results,generating value to the business.Interbrand is the pioneer inthis subject, which it has beendeveloping since 1988.Weannually prepare the Best GlobalBrands ranking, published bythe Business Week magazine as wellas specific rankings by country.TextDaniella Bianchi,André Matias, Victoria Murat,Laura Garcia and Beto AlmeidaGraphic projectCris Inoue, Pedro Mattos,Daniela Moniwa andRenata RodriguesImages and illustrationsare not for commercial useCreditsPhotographyPage 4 // Flavio 20 // Insper