Optimising brand value after a merger, acquisition or spin-off

Challenge — Mergers & Acquisitions

Mergers and acquisitions remain crucial to many B2B growth strategies, even though up to 90% fail. The right M&A brand strategy can help organisations strengthen their offering, attract new customers, grow market share and increase value.

Typical Indicators

  • The portfolio lacks clarity, coherence or focus
  • Merged businesses have contrasting cultures
  • People have become disengaged
  • A spin-off business needs its own brand after a divestiture
  • Siloed-thinking prevents collaboration
  • Existing brand strategies are conflicting

Mergers, acquisitions and spin-offs pose significant brand challenges that can hamper the success of the newly-formed organisation. The primary goal of increasing brand equity across the new businesses can, in reality, risk doing the reverse.

When brands merge, it can be challenging to maintain a clear and concise value proposition that resonates with customers. As a result, inconsistencies in messaging, branding, and design across different organisations will become increasingly apparent.

Brand cannibalisation can occur when a company’s product or service competes with itself or other brands, reducing sales and market share. Poor planning, a lack of portfolio strategy or differentiation, and too many similar products can lead to confusion, inefficiency, and reduced revenue. 

Cultural differences may arise as employees of the acquired brand resist changes to their long-established ways of working and cultural codes. Disengagement, siloed-thinking, and confusion around the new entity’s brand identity and values will likely grow. As employees jump ship and customer experience declines, the company’s reputation is negatively impacted, and customers may take their business elsewhere.

Six strategies for a successful merger or acquisition

A merger, acquisition or spin-off is a strategic initiative that can deliver significant benefits for organisations. However, they can also be complex, risky, and challenging to execute successfully. Assigning a clear role for each brand and optimising the value across the portfolio requires detailed planning, execution, and due diligence.

1

Clarify the brand's purpose and values

Reviewing each organisation’s core DNA and business style should be a priority for the management team and is a vital component of every M&A brand strategy. Following a merger, the combined organisation must make the time to define a new overarching purpose or risk defocusing the brand. In the case of an acquisition, the goals of the dominant business could remain the same or may evolve. With a spin-off, a new purpose could well be the reason for its divestiture, so definitively expressing it will avoid confusion and provide a ‘true north’ for the brand. 

Brand workshops that will align stakeholder thinking and find common ground during these pivotal moments are invaluable. Senior leadership can unite around a shared purpose and vision, capitalising on the momentum that comes from significant change. And just as importantly, employees can work together to find common values, breaking down the silos that might otherwise emerge from different workplace cultures. 

2

Design and test brand architecture options

An effective brand architecture strategy is designed to create synergy across the portfolio. The goal is to discover the best ways to use and benefit from each brand’s strengths while keeping them clear and separate. Any new merger or acquisition must be planned with this in mind to maximise value and protect brand equity.

Businesses should start by envisioning an End-State Framework consisting of two parts: the Brand Hierarchy, a structured ranking system that defines the importance of various entities and offerings, as well as the associated brands, in achieving key business goals. And secondly, the Organising Principle, the strategic structuring of the portfolio to promote growth and meet objectives. By mapping out various relationships between brands, sub-brands, and product lines, it’s possible to assess alternative approaches.

The next stage is to decide, using a criteria-based tool, what type of brand each entity or offering should be – a master brand, product brand, sub-brand, etc. Finally, a Migration Plan will map the route from the current portfolio to the desired end-state and include details such as timing, sequencing, operations and customer communications.

So, for example, a portfolio might transition from a ‘house-of-brands’ structure to an ‘endorsed’ model for a short time to allow customers to become accustomed to the change. Then, eventually, the portfolio may move to a ‘branded house’ architecture to unify completely.

3

Reinforce your brand architecture with the optimal naming system

The right naming system helps create a cohesive and consistent brand portfolio by ensuring that each brand’s name supports the broader strategy. It considers factors like brand differentiation, brand hierarchy, and the overall brand architecture. During an M&A, whilst reviewing the merged portfolio, there is an opportunity to rationalise and simplify the product, service or entity naming system.

The naming system will vary according to the chosen brand architecture and portfolio style. A branded house, where all products, services, and sub-brands are closely tied to and share the primary brand’s name, will look for a template system with order, structure and extensibility; Adobe’s products, like Photoshop, Acrobat and Illustrator, all use the parent brand name. A branded house approach to your naming system helps create a consistent and clear brand image and message across all touchpoints. 

Conversely, in a house-of-brands architecture, names such as Facebook, Instagram, and WhatsApp are often better known than their owner, Meta. This approach allows them the flexibility to target distinct audiences and market themselves uniquely. Large businesses with complex portfolios may operate a hybrid model that exploits the strengths of each architectural approach.

A well-defined naming system can make it easier for customers to understand and relate to the various brands within the portfolio and can reinforce the overall brand identity and image. Executed well, it will mitigate risk, facilitate a smooth transition, strengthen brand equity, and lay the foundation for long-term success.

4

Every M&A brand strategy should foster a lean portfolio

Bloated portfolios with too many extensions and irrelevant sub-brands drain resources and hinder momentum. A strong brand portfolio avoids cannibalisation and focuses on providing maximum value with fewer brands. 

Visualise the portfolio as a football field, where each brand, product, or service has a specific position but also plays an interconnected role in delivering the bigger strategic objectives. Reassign redundant players to new spaces where they will be more effective and remove the underperforming ones. 

Tech companies with extensive product portfolios use ‘systems thinking’ to guarantee product compatibility and synergy. For example, Apple ensures that its hardware and software products work seamlessly together, enhancing the overall user experience. This approach strengthens customer loyalty and drives sales across the brand portfolio.

In the automotive industry, companies like Volkswagen Group manage a diverse range of brands, including Volkswagen, Audi, Porsche, and more. Systems thinking is essential for product development, as they need to ensure that innovations in one brand can be leveraged across the portfolio to save costs and improve technology-sharing.

5

Explore a rebrand and name change

Rebranding is valuable during times of change, and particularly after a merger. It allows a fresh start, creating a cohesive image that reflects the combined strengths and values of the two organisations. 

A new visual identity often goes hand-in-hand with a new name; the intention being to signal a shift in positioning, change market perception or simply differentiate from competitors. The new brand may be growing and wish to find a name that works in global markets or needing to avoid legal issues. Whatever the motivation, there is no better time than when change is already inevitable.

The merger of telecom giants, Bell Atlantic and GTE, in 2000 led to the formation of Verizon Communications. The name “Verizon” is a combination of the Latin word “veritas” (meaning truth) and “horizon,” signifying their commitment to truth and the promise of a bright future. This renaming helped create a unified brand identity for the merged telecommunications company and improved memorability, brevity and perception.

6

Plan well to bring everyone on the journey

During the planning phase, clear communication is essential to prevent confusion and chaos. It reduces uncertainty, sets expectations, and builds trust. By being transparent and open, a strong brand community will be established. Maintain consistent messaging, comply with legal and regulatory requirements, and be prepared for unexpected events with a crisis communication plan.

When engaging different audiences like employees, customers, suppliers, investors, regulators, and the press, deliver relevant key messages about the transaction, new direction, benefits, and operational changes while being upfront about the impact. Engage early and often… prioritise employee engagement, maintain customer and supplier relations, and reassure investors about the M&A’s rationale and benefits.

If you're looking for help with your M&A strategy, let's talk.

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