Mergers and acquisitions (M&As) are a great way to grow an organisation but they come with a certain amount of risk. One of the biggest challenges of M&As is choosing which post-merger brand strategy is right for your organisation and executing it effectively.
Branding is essential for any business but is especially important post-merger. When two or more companies merge, they are essentially creating a new brand. Some brands dovetail nicely, boosting customer loyalty and growth. However, more often than not, most brands struggle to find the right synergy, and any attempts to merge fail with sometimes catastrophic consequences.
According to a Harvard Business Review report, the failure rate for mergers and acquisitions is between 70-90%. Leveraging the right M&A brand strategy can make the difference between success and failure.
The 5 post-merger brand strategy options
1) Retain both brands (stay the same)
The most straightforward and affordable strategy is to do nothing and let sleeping dogs lie. The acquirer and target brands remain the same and portray themselves as two entirely different and separately recognisable brands.
One of the main benefits of brands staying the same after a merger is that it helps maintain customer loyalty and trust. Familiarity with a brand can create a sense of comfort and consistency for stakeholders. However, if the merger involves two brands with different reputations or target markets, keeping both names may dilute the strength of each brand. Additionally, merging two brands with similar products or services may confuse customers and make it difficult for the new company to differentiate itself from competitors. Whilst staying the same will be the most affordable strategy in the short term, the long-term management of two separate brands will be costly. Overall, the decision to keep brands the same after a merger should be carefully considered and based on the specific circumstances of the companies involved.
2) Fuse the two brands together
This approach combines the acquirer and target brands to form a new brand where the identity of the original parties remains visible in the brand name.
One advantage of this approach is that it can help build brand recognition and customer loyalty by leveraging the strengths of both brands. This can lead to increased market share and profitability. However, the downside is that the new fused brands may confuse customers or dilute the original brands’ image and reputation. Additionally, creating and launching a newly fused brand can be costly and time-consuming.
3) Retain the stronger brand
The combined businesses adopt the acquirer’s or target’s brand, whichever is stronger, and remove the other brand altogether.
The benefits of this approach include leveraging the established reputation of either the acquirer or target brand and will simplify marketing efforts. However, drawbacks can include losing the other company’s unique identity and backlash from the absorbed brand’s employees and customers.
4) Create a parent brand
A new overarching brand is inserted above the existing brands to give a separate identity to the new group. Typically, the target and acquirer brands are retained to maintain an identity for the existing businesses, now captured as separate entities within the group.
One of the significant advantages of creating a parent brand after a merger and acquisition while keeping the original brands as sub-brands is that it allows for a clear and unified overarching proposition and message. By retaining the original brands, businesses can leverage the established brand equity and customer loyalty that comes with them. However, one potential disadvantage is that it can be challenging to maintain a consistent brand identity across multiple sub-brands, which could dilute the parent brand’s messaging and confuse consumers. Managing multiple brands under one parent company can also be costly and time-consuming.
5) Design an entirely new brand
The combined businesses create an entirely new brand with limited or no identifiable connection to the integrated companies.
A new brand can signal a fresh start and a break from any negative associations of the past. It can also allow for merging different cultures and values into a unified and consistent brand identity. However, creating a new brand can also mean starting from scratch and losing any brand equity and recognition that the existing brands had. Establishing a new brand and building brand awareness can also be costly and time-consuming. Ultimately, deciding to create a new brand after a merger and acquisition should be carefully evaluated and weighed against the potential benefits and drawbacks.
The role of brand architecture & portfolio in a post-merger brand strategy
Whichever strategy you choose, the right brand architecture and portfolio strategy are critical to any M&A success. When two companies merge, it is essential to consider how their brands will come together carefully.
By designing a well-thought-out architecture for sub-brands, products, or services in a portfolio, a company can have the ability to offset risk or create more leverage. It can also help customers, employees, and other stakeholders understand and support the new merger.
- Accelerate your business with a winning brand portfolio strategy
- Create a clear brand architecture to drive growth
Tips for successfully implementing a post-merger brand strategy
- Don’t delay. The branding process should start as soon as possible after the merger announcement; this will give you time to develop the right strategy and execute it effectively.
- Be consistent. The branding should be consistent across all channels, including the company’s website, marketing materials, and social media. Being consistent will help to create a recognisable and memorable brand.
- Be transparent. Mergers and acquisitions can be complex and challenging to understand for customers, employees, and investors. Inform all stakeholders about the branding process and the reasons for the merger. Being open and honest will help to build trust and confidence in the new company.
- Align cultures. Culture and values are critical aspects of any business, defining how employees think, behave, and interact. When two companies merge, aligning their cultures to create a cohesive and supportive environment for employees is vital.
- Be patient. It takes time to build a strong brand. Don’t expect to see results overnight. Be patient and consistent, and you will eventually see the fruits of your labour.
M&A deals can be risky, often involving significant changes to the business and its operations. Effective branding can help to mitigate these risks by creating a sense of stability and continuity for customers and employees. By developing a solid brand architecture and a robust brand identity that reflects the values and strengths of both companies, the newly merged entity can reassure stakeholders that the business is in good hands and that the merger is a positive development.
If you are struggling to choose or implement the right post-merger brand strategy, drop us a line — we’d chat about which option is right for you.