How to manage your brand identity in a merger

A key and emerging imperative in brand management is portfolio management in scenarios involving mergers and acquisitions. Global organisations are increasingly looking at growing via acquisitions in target markets or by selling off non-core businesses. Procter & Gamble is in the middle of one such consolidation programme. It intends to divest more than 100 brands from its portfolio by the end of 2015. The other avenue for growth is mergers, where organisations are increasingly looking at partnering with one another to garner market share, take on competition more effectively and expand their global footprint. Think about the recently announced proposed merger between Kraft and Heinz.

Managing an expanded or significantly altered portfolio of brands in a merger and acquisition scenario has direct implications on brand management, as they still need to evolve simultaneously or come together. Making the decision is not easy but based on my experience the key factors that need to be considered are:

How to assimilate

Direct acquisitions need to be assimilated into the existing portfolio in a manner that does not disturb the existing relationships between portfolio brands. Acquired brands need to be aligned with the relationship that exists between the corporate brand, product brands and any sub-brands. This requires a strategic review of names of the acquired brands and existing, and intended, brand positioning in the portfolio.

All organisations manage this process differently. Depending on the market strength of the acquired brand and the acquiring company’s brand architecture strategy, assimilation into the portfolio can happen in multiple ways:

-The acquired brand can be allowed to continue for a selective period of time if it has the strength, which originally made it attractive for an acquisition. Think about Hewlett Packard’s acquisition of Compaq. Because of the existing brand equity, the name was allowed to continue in selective retail channels before it was slowly phased out (but the product lines were assimilated into HP’s product range).

-Luxury houses are going through this assimilation process all the time. Conglomerates like Kering, Richemont and LVMH are acquiring luxury labels on a continuous basis and assimilating them into their product portfolio. Because all luxury houses have the ‘house of brands’ brand architecture framework, assimilation for them is about positioning the acquired brand in the right product category as well as the right price segment within the architecture.

Keep competing brands

In many instances, corporate acquisitions result in portfolios with brands that compete with each other in the same category or even in a specific segment. Decisions around integrating them into the portfolio and brand architecture can be two-fold. Companies can either slowly phase out one of the directly competing brands, letting the bigger brand take over existing assets, or allow both brands to operate as they always have with strong endorsement from the corporate brand. In scenarios where there is no corporate brand endorsement, the decision on brand architecture alignment rests on factors such as strength of independent brands and co-branding avenues. Relevant examples are Daimler-Chrysler Corp. and Molson Coors Brewing Co.

There is an interesting aspect that is worth pointing out. In the above examples, the actual end consumer is completely unaffected by the decision to have both brands in the name of the merged corporate entity. This is because the product offering is for individual brands, which were left untouched. For example, in the case of the Daimler- Chrysler merger, the customer facing brands – which included Mercedes- Benz, Chrysler, Jeep and Dodge – were maintained as separate entities in the merged product portfolio.

Phase out your acquired brand

Quite commonly in acquisitions, the acquiring company phases out brands of the acquired company over a period of time. The whole process may take place over three phases: both brands co-exist, the brand to be phased out starts getting endorsed by the stronger brand and then finally the stronger brand replaces the phased out brand completely. Microsoft’s acquisition of Nokia’s global mobile phone business adopted a phasing-out strategy of the Nokia corporate brand endorsement.

What to do with a divested brand

From the seller’s perspective, an acquisition means that the brand portfolio has been rationalised. From a brand architecture point of view, it means realigning the corporate brand, product brands and any sub-brands into a new framework that represents the relationships accurately. Most sell-off decisions are driven by poor performance and non-core businesses. But many sell-off decisions can potentially have a strong impact on the equity of the corporate brand (e.g. Nokia selling of its mobile phone business to Microsoft or Ericsson discontinuing mobile phones products).

Divested brands generally disappear, either instantly or in a phased-out manner, from all customer-facing channels. Like the above example, it can mean a corporate brand completely disappearing from a particular product portfolio or a product-brand slowly disappearing.

Manage a portfolio

Mergers, in contrast to direct acquisitions, present a different set of challenges. Depending on the terms of agreement and majority-minority stakeholder status the merged entity needs to take decisions on rationalising the expanded brand portfolio. In these circumstances, the decisions around rationalisation are complex. Brands coming from different stables that are direct competitors need to be treated carefully and a strategy needs to be adopted going forward. In many instances the merged entity has a new brand name, which in turn changes how the corporate brand will endorse others in the portfolio. Examples include when French pharmaceutical major Rhone- Poulenc S.A. merged with the German corporation Hoechst Marion Roussel to form ‘Aventis’ in 1999.

There is an alternative strategy, which is about communicating the joined message of two companies coming together with a new vision, identity, brand strength and customer focus. The earlier examples of Daimler- Chrysler and Molson Coors Brewing Co. are equally relevant here but so are examples like BNP Paribas.

Consider the very recent merger of online fashion retailers Net-a-Porter and Yoox. The merged entity will be called the Yoox Net-A-Porter Group but the consumer facing brands will remain unchanged.

When two brands collide

Mergers and acquisitions have significantly changed the operating models and structures of organisations. These strategic changes have significantly impacted brand management processes. Because mergers and acquisitions are primarily the result of endeavours to identify and unlock growth opportunities, it is crucial that the vehicles of growth – namely brands – are managed efficiently in the whole process.

The evolution of the portfolio and the associated brand architecture in mergers and acquisitions scenarios can take a significant amount of time to stabilise. This is driven by the fact that acquired brands take a long time to get fully integrated into the existing business structures of acquiring organisations. Therefore, having a long-term lens is critical.

To achieve efficiency and position the portfolio for future growth, national and international branding strategies should focus on creating sustainable, coherent, clearly defined and actionable brand architecture for the portfolio. This acts as a navigation map for portfolio management and for brand custodians to manage the portfolio in a manner that leads to a sustainable, medium and long- term growth path.