branding the merger, merging the brands

Branding the Merger,Merging the Brands

Published for

by the author of Leveraging the Corporate BrandJames R. Gregory, CEO Corporate Branding, LLC

1

Branding the Merger, Merging the Brands

Merger activity is positively frantic—hundreds are initiated eachweek. As one indication, demand is actually growing for skilledmerger and acquisition specialists, as other professionals in thefinancial industry are laid off by the thousands. But, mergers cantoo often be minefields. According to the Conference Board, lessthan half of the mergers completed during the 80s and 90s havecreated real value for shareholders. McKinsey & Co. claims thatnearly 80% of mergers don’t earn back the costs of the dealsthemselves. 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, angerand uncertainty among employees. This leads to talent raiding—non-merging companies scoop up good people who are worriedabout their futures just when distracted executives need themmost. Altogether, not a very pretty picture.

3

Branding the merger, merging the brands

The classic corporate brand communicates its company’sessence, character and purpose, and calls to mind its productsand services. Correctly created, managed and presented, it shouldinstantly flood consumers in all audiences with confident andaccurate, expectations—why would they think, or want, to goanywhere else? The new brands created by merging companiesshould purposefully shore up consumer confidence, at the sametime igniting their excitement.

The power of a corporate brand shows up in its stock price.Corporate Branding’s research indicates that, on average, acorporate brand impacts stock performance by 5%—a significantnumber that can make a major impression on market valuation.

During changing times, particularly throughout mergers andacquisitions, the corporate brand can be a lifeline. All constituencies,looking for reassurance that, post-merger, they will still be able todepend on what they have come to value, cling to the corporatebrand. It becomes a symbol not only of what to expect in thefuture, but of why the merger is taking place at all. All eyes are on the brand—it’s the kind of visibility that can prove enormouslyleveragable. Be prepared to exploit it. Protect, preserve andleverage the value of your corporate brand always, and especiallyduring a merger.

2


What’s the problem? And what could make the difference?The integration process—or lack of one—has been blamedlargely for merger failure.

BMW, which purchased Rover Group Plc in 1994, found it difficult

to turn a profit from the merger. Chairman Bernd Pischetsrieder

told Manager Magazine, “We made the mistake of not acting

quickly enough to push through integrated work processes.”

(Reuters, December 1998) Unless vision and values can be

made to align, and lines of communication remain open, those

processes are doomed. Companies that understand this are

more likely to be viewed favorably by potential acquisitions, and

to experience merger success.

The Wall Street Journal cites Ford as the automobile industry’s

“acquirer of choice,” given its reputation for “providing capital

and expertise without diluting a brand’s character.”

Vision, values and communication are at the heart of brandbuilding, which is at the heart of successful integration.However, with so much to think about—so many distractions—harried executives and bankers often give short shrift to theircorporate brands, which are among the participating companies’most important assets. They can—and should—be fiercelyprotected and put to work immediately on the merged company’sbehalf. In fact, making the brand part of the deal itself is one wayto circumvent merger breakdown. Do yourself a favor, and get iton the table from the beginning.

5


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 itreflects the “why” accurately and appealingly is critical. It can onlyhappen if you ask the same appropriate questions throughout themerger negotiations that you ask throughout the branding process.

Failure to understand and articulate the brand will likely lead tofailure of the merger itself. Avoid merger meltdown by telling thewell-considered truth about your brand from the very beginning—to yourself, to your merger partners, to your employees, and toyour consumers.

Exploit initial interest.Corporate visibility among the media, employees, customers,shareholders and regulators is at an all-time high during theannouncement of merger or acquisition. Be prepared to take fulladvantage of this remarkable opportunity to communicate on agrand scale. Be careful of timing—in some cases, stockholders must vote before you can make an announcement.

Why, and how does our growth depend on this 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?

1:

2:

Eight Principles of Branding a Merger

4

7


Leverage the brand.When over-anxious bankers are intent on just closing the deal, it’s not always easy to keep an eye on the brand. But the intensityof a merger environment can offer moments of creative brillianceif you actively consider the brand’s role in the deal. It’s common, for example, on announcement, for the big fish to swallow thesmaller, along with its brand. This is not always good for long-term brand building. It can pay off to adopt one or the other ofthe existing corporate brands, if that brand will work hardest onbehalf of the merged company, and accurately reflect thecombined vision and intent.

Sometimes, other considerations force both brands to besubsumed within a brand new one.

Post-merger, Ciba-Geigy and Sandoz chose to call themselves

Novartis, to indicate the formation of a brand new, completely

different—and cooperative—company. Though a sound choice in

this case, it’s smart to acknowledge the loss of equity that results

from walking away from old, well-established, original names,

and to compensate for that loss.

On the other hand, when Novartis’ chemical business was spunoff, it called itself Ciba Specialty Chemicals—retaining the oldname and adding a descriptor—it slowed the process of corporatecultural assimilation. Though the division was a big brand winner—a known entity from day one, leveraging the brand equity in arecognized name—the company had to work hard internally toget everyone on the same, new team.

6


Regardless, keep discussions absolutely secret until you are readyto announce, and have a plan in place at all times in case of leaks.Think through, and prepare, clear, concise, consistent ways tocommunicate the business logic behind the deal to all audiences.

Do not allow a communications vacuum to develop as yourmerger unfolds. Remember, this is the time to seize the day, notto sit back—your merger will never get more attention than at thismoment. Good—and timely—corporate communications willinfluence the opinions of all constituencies. Early communications,just after the announcement, will set the tone, create the firstimpression (most remembered), and pave the way for overallmerger success.

Appoint a senior spokesperson to plant the seed of the businesslogic behind the merger, so you are fully understood and appreciated.

The DaimlerChrysler merger established a beautifully coordinated

corporate branding campaign from the very beginning. Every

communication, incorporating a simple, clean, unpretentious name

and logo, was designed specifically to support the underlying logic

of the deal. Senior management of both companies made

themselves available to the press, initiating clear and consistent

ongoing media relations. The entire advertising campaign stayed

focused on the key issues and spoke cogently to all constituencies.

3:

9


are going to get out of it is a one-shot reduction of costs.” It’scertainly not the compelling reason needed to excite consumersor to start building a strong new brand.

The dealmakers at BP/Amoco, on the other hand, operating in

the same difficult world oil market, announced and negotiated

regulatory hurdles with relative ease. This merger, made between

non-competitors for the good fit available, and to gain cultural

advantage, offered a much better opportunity for long-term

brand building.

Create internal buy-in.A merger can be very scary for employees, who typically feelapprehensive when they start to think about what it means for thebusiness, and for them personally. What will our customers think?Will this work with our current business strategy? What about myjob? Will I have to re-locate? How will I be treated by the new brass?

Reassuring employees, while merging two distinct cultures intoone, are not easy tasks—they can even seem diametricallyopposed. But carefully thought out and well-executed internalcommunications, and the infrastructure to support the brand over time, will pave the way.

If possible, don’t let your employees find out about your mergerfrom the media. Tell them yourself, through a supervisor or acompany-wide communication, such as a personal announcementfrom the chairman.

8


Similarly, when companies choose to combine their names in areadthrough, like DaimlerChrysler, there can be a tendency toretain two divergent cultures, if measures are not taken to meshthem into a comfortable new whole. Obviously, there is no one“right” answer, but considering the brand’s role in the deal will guideyou toward the right one for you. Remember that any choice isbound to create its own management and communications issues,which must be carefully considered and handled.

Take note: bankers don’t give a hoot.About your brand, that is. Bankers are necessary, but they arefocused on closing the deal, not on the long-term care andfeeding of the brand—even though, in the end, the brand will be much more valuable than the deal itself. So it’s up to you, as senior management, to defend the brand as a merger iscontemplated. Don’t expect that anyone else will take care of it,particularly not the money people. Keep the bankers out of the communication business. And make sure the deal makessubstantive sense—that it’s not simply motivated by a big numberthat won’t sustain itself.

Merger frenzy in the oil industry offers several examples of brandhandling—and mishandling.

The Royal Dutch/Shell Group bankers have jumped the gunseveral times, with premature announcements of pending dealsthat ultimately misfired. In December 1998, Reuters quotedChevron Corp’s chairman and chief executive, Kenneth Derr, whoquestioned the wisdom of a major merger “…if the only thing you

4:5:

11


The designation of a single corporate spokesperson for both sidesof a merger, indicates the spreading acceptance of consistency as critical. The “Chief Communications Officer” reports directly to the CEOs and CFOs of both merger partners, and representsboth concurrently. Clearly, this person must enjoy universalcredibility and the confidence of employees, customers and thefinancial community.

Communicate the brand for keeps.Take the communications offensive, and control the chatter. Your competitors and the marketplace will try to define your newcompany and its brand—don’t let them. Think carefully about thefirst year of internal and external post-merger communications.Develop a meticulous brand strategy, and support it with newcorporate communications that accurately represent the newentity. Talk to all your constituencies, often and consistently. Plan to keep doing that for at least three to five years.

When Bell Labs spun off from AT&T, it was one of the most widely

held stocks in the world. Though many might have sat on their

laurels, Bell Labs chose to create a new name and to launch an

entirely new brand, investing significantly in that branding effort.

Today, Lucent Technologies has a larger market cap than its

former parent, AT&T. Supporting the brand was not only

courageous—it was very smart business.

10


Follow up early with a steady stream of correspondence explainingmerger whys and hows—through newsletters, the company intranet,pay check stuffers and bulletin board notices. A few months downthe line, pamphlets about brand strategy, philosophy andcommunication can inspire employees to assimilate the brand, andimportantly for the brand’s strength and longevity, begin to live it.

Employee get-togethers create an esprit de corps between diversegroups. Think about launching the new logo with a company-wideevent. Encourage periodic meetings between groups from eachmerger partner, to identify synergies and develop processes for working productively together. Finally, consider establishing a brand council, made up of communicators from each company.The council’s mission: to ensure clear, consistent brandcommunications through ongoing development and review, and to create guidelines for universal brand communication.

Avoid the schizophrenic brand.Consistency is key to building brand credibility. Be sure tocoordinate communications, so that one merger partner does notunintentionally contradict the other. Ultimately, this contradictionrequires both to modify their positions—causing irreparabledamage. Inconsistency destroys existing brand power, confusesemployees and consumers, worries shareholders and potentialinvestors. Allow it, and count on starting from square one interms of building brand.

6:

7:

The Right Communications PartnerIf you want to fully exploit initial interest in your new brand, andshowcase it as it matures, you’ll want to take full advantage ofcarefully considered opportunities for media placement. Any mentionof the brand, whether in an ad or editorial, is important in reachingthe maximum number of potential customers, as well as those whomight influence your corporate reputation.

Brand builders must educate and communicate with decision makers—those individuals in top management who make the administrativeand buying choices. These are the people who read Business Week.Simply put, Business Week is read by more business professionalsthan any other business publication in the world, which makes it theideal place to introduce and nurture your new brand in print.

The major players who choose Business Week as an advertisingvenue and a source of information, are evident in Business Week’sAwards of Excellence in Corporate Advertising, a list which, since1985, has recognized outstanding corporate campaigns. Awardsare given on the basis of independently gathered advertisingreadership scores, and create another tool with which companiescan gauge the effectiveness of theirbranding efforts. For further information about the awards oradvertising in Business Week,please contact Bill Kupper, Business Week’s AssociatePublisher, Worldwide SalesDirector at (212) 512-6945.

12


Think global, act global.The world just keeps getting smaller, which will profoundly affectmergers and acquisitions. The Euro will ease, and ultimatelyeliminate, many currency issues. Companies will list on stockmarkets worldwide with greater and greater regularity. Onlinestock trading will become standard operating procedure. Mergerswill include global combinations that few would have believedpossible until very recently. The lesson here: Consider, and heed,the global impact and implications of every single communication.

Deutsche Bank’s takeover of Bankers Trust, the Hoechst/Rhône-Poulenc and Daimler/Chrysler mergers, and LG Electronics’acquisition of Zenith all reflect the new global merger mentality.It’s a new kind of global thinking about business…a world withoutpreconceived ideas…a world without barriers.

Work the Brand so the Merger WorksThe branding opportunities—and challenges—offered by a mergeror acquisition are tremendous. There is significant—often dramatic—change present. People are paying attention. Employees areanxious about their futures. The financial community wants toknow how the business will grow. Customers are watching, andso are competitors.

The cost to brand a merger the right way is not much more thana decimal point on the deal. The potential returns are enormous.Take full advantage of the momentum and possibilities an M&Acan bring to a brand. Your bottom line will thank you for it.

8:

Based in Stamford, Connecticut, Corporate Branding, LLC, is a highly specialized globalcommunications consultancy that works with advertisers and agencies to measure andleverage companies’ corporate brands with key audiences. Their breakthrough work in analyzing the return-on-investment (ROI) for corporate advertising is changing theperception of advertising by senior management of companies around the world. Oncethought of as an expense, corporate advertising is now considered an investment thatcan 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 Leveragingthe 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, publishedby the Association of National Advertisers (ANA), and his company’s publication, Q&Aon 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

Jim Gregory

branding the merger, merging the brands

Marketing

contact bill

term brand

business week

corporate

jim gregory

financial

corporate

corporate