Brand Strategy for Mergers and Acquisitions - Part 1

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Posted Aug 02, 2012
Susan Gunelius

Recently, AOL closed AOL News with a brand strategy that would make its acquired Huffington Post the primary brand identity for its online and mobile news and commentary content publishing. Mergers and acquisitions of companies and brands usually mean the resulting brand portfolio has to be evaluated and changed. Why do some brands pursue a decentralized brand portfolio strategy while others choose centralized strategies? That's the focus of my two-part series on the AYTM blog, Brand Strategy for Mergers and Acquisitions.
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brand strategy mergers and acquisitions

First, let's take a look at the options that companies have when it comes to evaluating and managing a brand portfolio after a merger or acquisition. Whether two companies with similar product lines and customers merge or companies with little overlap in terms of products and customers come together, decisions need to be made to ensure the overall brand portfolio of the resulting company is cohesive.

For example, when Unilever acquired Bestfoods in 2000, Unilever ended up with a portfolio of 1,600 brands. The resulting brand portfolio was massive and required excessive and redundant manpower, resources, and budgets to maintain. Therefore, the company launched a program referred to as "Path to Growth" and ultimately, reduced the brand portfolio to just 400 brands. Some brands were combined. Others were sold. In the end, the new Unilever brand portfolio was stronger overall.

When companies merge, there are several choices that leadership has to make about the combined brand portfolio. Brands can be transitioned to the acquiring company's brand names, or they could retain their original brand names (as happened with AOL and the Huffington Post). Another option is dual-branding, where the two brand names are combined. This dual-branding strategy is often pursued when merging companies combine company names to form a new company name like PricewaterhouseCoopers.

Dual branding is also popular as a brand name transitioning strategy. For example, the acquiring company name is tacked on at the beginning or end of the acquired brand names. This strategy is commonly used during a transition period while the acquiring company tries to decide (usually through market research) which brand name is more powerful and should stay.

A dual branding strategy could be considered a mistake because research shows most consumers don't recall dual brand names. Instead, they recall the one brand name that resonates most strongly with them. As Al Ries explains, "The most powerful brands are those that stand on their own, without corporate endorsements or master brand hocus-pocus. Strong brands are invariably a single word or concept."

Most importantly, all brands should be evaluated to determine how one brand might negatively or positively affect another in the brand portfolio or the company reputation. Should some brands be decentralized and marketed separately from others in the brand portfolio because they aren't congruent with the acquiring company's overall brand promise (or vice versa)? These are decisions that require detailed analysis. They shouldn't be made lightly, but decision makers should keep common sense in mind.

Al Ries said back in 2009, "If Nestle bought Red Bull, should the brand be re-badged as Nestle Red Bull? I think not." Just because a brand is acquired doesn't mean that it needs to take on the acquiring company's name. Use common sense.

Of course dual branding also helps a lesser known acquired brand gain quicker recognition, consumer trust, and recall. It's also less expensive to market a lesser known or unknown brand under an established brand name. That doesn't mean it's the best decision to rebrand acquired brands with the acquiring company's brand names though. Brand merger and acquisition decisions are ones that shouldn't be made without adequate market research to better understand how consumers perceive both brands post-merger. That's the subject for Part 2 of Brand Strategy for Mergers and Acquisitions, so stay tuned to the AYTM blog.

Image: ilker

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