What happens to brands in mergers and acquisitions?

Mergers and acquisitions (M&As) can be complicated processes. Whether it’s a small startup being acquired or a merger between two giants, there’s a lot that needs to be taken into consideration long before any contracts are signed. For many companies, branding is put on the backburner during the M&A process while sorting out tangible assets takes first priority. But thinking about branding early on in the process is crucial, especially since it can guide business strategy and direction.

There are a few different routes brands can go down during M&As. One is assimilation, where one brand is completely taken over by the other. This usually happens when one brand is a lot stronger, so giving up the weaker brand doesn’t seem like a huge loss. It gives companies a lot less to think about in terms of branding as they just carry on as one brand. While this is a simpler route, it does mean the potential of the discarded brand goes down the drain with it.

Another option is creating a fusion of the brands. It makes sense - merge the companies, merge the names. Both companies can bring some brand equity to the table and the merged company will appear as an equal partnership. Mergers that go with fusion branding have also been found to perform better on the stock market than mergers that go with other methods. But success will depend on whether the companies can work together as equal partners, so it’s vital that the new brand reflects what’s happening internally.

Some companies go for the option of creating a completely new brand when they merge. It’s a good opportunity for a fresh start and a new brand clearly signals to everybody that the company wants to make a change. But it’s also not the easiest option. M&As are already huge undertakings and creating a new brand on top of that adds a lot more work. If the new brand is going to be good, it’s going take time and money, so companies need to make sure they’re prepared to spare the resources.

Companies in M&As have another option for their brands: do nothing. The brands remain the same and the companies go about business as usual. Keeping them separate can help preserve the cultures of both companies, and considering a lot of mergers fail due to culture clash it’s not a bad idea. Usually both companies keep their brand equity but there are some cases where the associations created through an acquisition can have a positive or negative effect on one or both brands. For example, when L’Oreal acquired the Body Shop, many people felt the Body Shop had abandoned their ethics since L’Oreal tested on animals. So just because the brands are kept separate doesn’t mean the M&A won’t have an effect on them.

It’s easy to let branding become an afterthought in M&As when there are so many other things to sort out. But a brand can be a business’ biggest asset, so it needs be taken into consideration ASAP.

Annabelle MayorComment