One of the main questions companies face when they acquire a new brand is whether to keep that brand alive, merge it with an existing brand in their portfolio (i.e. rebrand), or retire it altogether. The question that underpins this decision is rather straightforward: in the long-run, what will be best for the business?
The answer to this question is multi-faceted and complicated. So much so that there often is a temptation to act quickly (some say efficiently), and bypass the due diligence required to consider all available rebranding options.
Other crucial considerations are timeline and budget. A total rebrand is an expensive endeavour, as is keeping two separate (and similar) brands alive and financially supported. There are a number of reasons to plough on ahead with a rebrand, just as there are many that make a solid argument for a slow/steady transition, and indeed no rebrand whatsoever.
In order to maximise the synergies promised from an acquisition, there can be no one-size-fits-all approach. Although the simplest approach is tempting, especially if your business is engaged in an active and rapid acquisition schedule. The hard truth is that a one size fits all approach can be effective, but by the same token can leave a risky door open for major brand equity and customer value loss.
When we are brought in to consult on acquisition strategy, we often find teams stuck on either side of this debate. The crux of the argument is whether the cost-savings from quickly exploiting the immediate short-term rebranding synergies outweigh the potential losses in customer value.
If this question is not answered objectively it allows space for internal politics to creep in, (especially in the case of a merger, with two equally sized brands).
It is also common for brand and marketing teams to be excluded from M&A discussion, and this is a costly folly. Marketing teams are acutely aware of the brand equity at stake, and this is often not valued or understood inter-departmentally.
Consensus is key.
In order to achieve this, it is prudent for teams to zoom out and understand the principle reasons to rebrand or not to rebrand.
Reasons to Rebrand
Broadly speaking there are seven commercial reasons why companies might want or need to rebrand:
- Acquirer brand stronger than the acquired brand: the acquirer might own a brand that will stimulate demand more effectively than the current brand.
- Acquirer brand weaker than the acquired brand in an important market: particularly for partial name changes, the acquirer may want to transfer the awareness and strength of a sub-brand to its own brand in a target market.
- Super-divisional (e.g. regional) marketing strategy: regional advertising and publicity such as an Olympic sponsorship may make it more effective and efficient to have a single brand for many markets.
- Organisational change and integration: the acquirer wants to make sweeping changes to the acquisition – in particular to integrate teams closely – and wants to signal that to employees and other stakeholders.
- Changes to the company’s offer: showing an improved or modernised service based on the new expertise and capabilities of the acquirer to customers. This may have the added benefit of highlighting the acquirer’s other products and stimulating cross-selling.
- Saving costs: multiple acquisitions in similar industries can mean that similar products and services are sold and marketed under different brands, increasing complexity and duplicating marketing, branding and management costs. Rebrands can be effective at eliminating or at least reducing those extra costs.
- Regulatory and contractual demands: where divisions of a company are sold and the original brand is still being used in part of the original company, it may be legally necessary to change brands to avoid confusion.
Reasons to not Rebrand
- Strong acquired brand: In many cases purchasing the brand was the purpose of the deal and is essential for maintaining value of the acquisition. This is the reason why industries with strong locally focussed brands like consumer-packaged goods tend to have much lower rates of rebranding.
- Disruption: big changes to brands can indicate big changes to service or the company’s way of working which can damage customer and employee loyalty.
- Cultural Differences: strong internal loyalty for the original brand and big differences in culture between the acquiree and acquired can make execution more difficult and costly.
- Accounting Complexities: rebranding may require the write-down of the purchased brand value which will reduce first-year accounting profits despite not affecting real performance.
- Planned Divestments: the acquirer may want to sell parts of the acquisition and selling them is easier if the next acquirer does not also have to rebrand.
- Cost and complexity of change: rebranding can take a large amount of management time and thinking. Since outcomes are often uncertain, sticking with the status quo is often preferred.