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Market dynamics are changing and there are value creation opportunities everywhere. There have been a spectacular number of M&As announced over the past decades. From 1996 to 2016 the number of global M&As has almost doubled, rising from 24,709 valued at USD $1,222 billion to 47,846, valued at USD $3,513 billion.
Brazil alone saw 598 M&As in 2016 valued at USD $44.6 billion, versus 182 in 1996 USD valued at $11.7 billion—with a major spike in between (the number jumped to 982 in 2008). Brazil is still undergoing its own major consolidations—a developing country that’s facing huge economic and political crises creates the ideal environment to practice this discipline.
Whether this is just the beginning, the middle, or the end of this trend is not yet known. What we do know is that investing in the brand is a powerful—and measurable—approach to M&A success.
Setting criteria for the brand decision
In the distressed atmosphere of an ongoing merger, the “brand space” can become an inspirational canvas on which to map the M&A’s success. The most important thing is to decide what to retain from each company, what to drop, and what has yet to be created.
Defining the correct criteria and KPIs to support this decision is the first step. While there are many benchmarks of success and failure to study, this is a chance to challenge the status quo and develop a solution tailored to your particular brand and business.
Understanding the synergies and risks will require a careful analysis of multiple dimensions: the business vision, culture, strategy, identity (verbal and visual), performance, and the impact on stakeholders of the merging brands.
Making the business case for the M&A brand
Building a business case for branding is a complex task, especially for businesses operating on a global scale. It can cost over a million dollars just to register a brand name in some countries. And changing a brand identity across numerous touchpoints is a significant undertaking—especially for consumer industries that have packaging, signage, delivery fleets, etc.
A hero example of a branding project that challenged the rules of M&A in its industry is LATAM Airlines—the result of the merger between LAN and TAM to create the largest airline in Latin America.
The objective—a single, new Conciliatory Brand—was a disruptive one. This was the first time a major airline merger resulted in the creation of just one new brand.
It was the ideal solution in this case, but a bold one. There were so many dimensions to consider: different cultures, countries, owner families, passions, political implications, system integrations, and a really complex implementation. It needed to prove that the cost of change would be balanced by the benefit of these new synergies. The business case was crucial to getting both airlines on board with the major changes about to occur.
Managing the M&A’s immediate impact
After creating the ideal solution, and supporting it with a solid case, the next challenge is establishing the rhythm of the project itself. While the merging organizations are dealing with the rational and emotional impacts of the deal, competitors are probably out there moving fast and taking advantage of the inertia.
While deploying a project like this can take months, it is important to signal to the market that things are changing for the better. Invest in finding the best talent as soon as possible and talk to them openly about the project’s impact, and they will be the first ones to fight for your solution.
Integrating systems and cultures is a process that takes time, but sharing quick wins along the way will boost cohesion and confidence.
Measuring long term M&A success
“Excessive expectation is the shortest route to frustration”
M&As offer a unique opportunity to measure brand value creation. Building this assessment into the process will guide your overall growth strategy. New performance measures should build upon existing KPIs—which is not so easy when the M&A result is a whole new brand. In this case, common discussions are: How do we define targets? Or, how can the new brand become stronger than a brand that already exists?
KPIs should be considered with multiple performance measures for a myriad of stakeholders—not just for the buyers and the sellers and their profitability goals. It is important to measure the impact on clients, consumers, employees, investors, providers, governments, and especially on the communities in which the brand lives.
Brand Strength as a measurement tool
Interbrand’s Brand Strength methodology is a multifaceted measurement framework that can be used to determine KPIs for an M&A.
Internally, it measures the clarity and commitment of employees to the brand strategy, the effectiveness of the governance systems that are put in place, and the responsiveness of the brand to the market changes.
Externally, it’s understanding how the brand is building authenticity, relevance, and differentiation. Additionally, it determines how present the brand is in the mind of audiences and how consistent its experiences are. Because at the end of the day, it’s crucial to understand how engaged people are with the brand, across the board.
In the case of LATAM, TAM was a strong brand in Brazil, and LAN a strong brand in the rest of Latin America. Additionally, both brands demonstrated strong connections with employees. Therefore, it was clear that the target KPIs for the new LATAM brand would have to build upon both LAN and TAM’s existing brand strengths, internally and in the market.
Looking ahead—with the right expectations
It is crucial to establish expectations around returns while determining how to collect evidence, and on what. But defining targets doesn’t mean being unable to deal with uncertainties and adjust the route if necessary. For example, it is normal to lose some clients and sales channels, but you can mitigate this risk by focusing on the long term and trying to stem attrition.
Defining a proper timeframe for assessing the performance of an M&A brand is imperative. Based on experience, measuring success within the first two years is a recipe for unwarranted disappointment. Like life, any M&A is fraught with triumphs and tribulations, from day-to-day and year-to-year. Lasting growth can only be accurately measured over time.