Mergers and acquisitions: taking care of rebranding
The mergers and acquisitions (M&A) process can be a huge opportunity for two companies to strengthen their image and the scope of offered services. However, there are several crucial challenges along the way. Admind’s transformation lead Dominika Konieczkowska-Kracik looks at how M&A affects both brands and their visual identities to discover the main principles that will help you avoid the most common mistakes.
Mergers and acquisitions are actually two different processes. With mergers, two entities of similar size decide to combine their businesses in order to create one more comprehensive and effective company. With acquisitions, there is one large company that wants to buy a smaller one, perhaps a startup. The goal is to broaden the offer of the purchasing party.
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In both scenarios, the situation of companies going through the M&A process drastically changes. And you have to be prepared for this shift, both from a technical and branding standpoint. Although there are some technical facets of this process that we’re going to mention today, we want to concentrate on the visual side of brand transformation. Let’s see how it affects both brands.
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How does M&A affect both brands?
In most instances, the ultimate objective behind M&A is to create a new, more potent market player. And when that goal is achieved, both brands get a significant boost.
From many perspectives, this process can be beneficial. First of all, customers get access to a more comprehensive offer without the need to drift from one company to another. The smaller brand can up its game thanks to the infrastructure and resources of the larger partner, and the purchasing party broadens the scope of their offer.
Typically, the company that’s being purchased fully integrates with the company that bought it. And, although it usually keep its original logo, all the other brand materials become unified. This includes layouts and templates, presentations, ads, websites and online stores, printed documents and materials, manuals and legal texts.
As you can see, that’s quite a challenging and complex process that involves experts of many different profiles and specializations. We’ll talk about that a bit more in a few moments. First, let’s discuss some of the most pressing challenges that need to be addressed during the M&A process.
What challenges do we have on the way?
The fact is, not every merger/acquisition is a big success. There have been situations when joining both brands resulted in the drop of their original values. One of the most high-profile examples of such unsuccessful M&As was the case of Kraft Foods and Heinz.
The Kraft Heinz Company
In 2015, food giants Kraft and Heinz agreed to a merger worth $63bn that created the third-largest food company in the world. Under the terms of this deal, as CNBC reports, Heinz returned to the public market with a 51% ownership of Kraft. Current holders of Kraft stock got 49% of the company. Two years later, the market cap of the combined Kraft Heinz brand was slashed to 50% of its original value. Just six months after this, it dropped to 30% of its initial value.
What were the reasons behind this failure? As always, there was more than one apparent reason. First off, both companies were producing food not necessarily considered healthy. And with the changing way of thinking about nutrition and the growing importance of ecology and sustainability, customers simply weren’t thrilled about this new food empire. Secondly, no thorough enough strategy would take all the aspects of this huge transition into account. And thirdly, as the company itself admitted, it was “overly optimistic” about the results of this merger. Significantly, Money.com called this new FMCG empire “insane.” And as history has shown, it was for good reason.
Why can M&A be a failure from a rebranding perspective?
Here, we’d like to mention three crucial reasons.
The first one is a lack of strategy. M&A is a complex, long-term process. You have to start with thorough research and a comprehensive plan to make it work. A large chunk of this strategy should be devoted to rebranding.
Secondly, there is lack of professional help. Cooperating with a third party that can take an objective look at the whole thing enables you to avoid the trap that Kraft Heinz fell into – excessive optimism. Working with an experienced branding agency will help you analyze the process from many angles. As a result, the chances of failure are lowered.
And the final reason may be lack of priorities. You can’t do everything at once. You have to prioritize various tasks and assignments that need to be done and put them on a transparent and well-thought-out timeline.
Today, we’ve barely scratched the surface of M&A and involved rebranding. It would be challenging to squeeze this whole subject into just one book, let alone an article. However, if there is an M&A process ahead, start with comprehensive research and strategy. You need to have the whole process outlined and divided into specific steps. It will be a good starting point. In the second article, we are going to show you how to avoid problems during M&A. You will also discover all the major principles that govern these complex endeavors.
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Admind Branding & Communications is an international branding powerhouse with top-tier creative talent drawn from around the world. We work with global companies, leaders in their industries, who are invested in the power of their brands and in the influence they have to change our societies for the better. Our teams in Kraków, Amsterdam, Odessa, Bangkok, and Zürich comprise more than 140 creative experts from over 15 countries.Find out more