So, you’ve survived the grueling M&A process, and you can officially call yourself “owner” of the company you’ve been coveting for months, or even years now. Is the hard part over?
Not necessarily.
In many cases, it’s wise to invest in re-branding and/or repositioning the organization after buying a business. This is especially true if the business was struggling due to misdeeds or poor judgment on the part of the previous owner or employees, or if their once-successful operation had flagged in popularity because they failed to evolve with the times.
But, rebranding and repositioning a business is no small task, and the challenges of doing so can be compounded by your status as a brand-new owner unless you’re well prepared and organized going into the effort.
So, if you’ve recently purchased a business that’s in need of a rebranding, or if you’re considering buying one that will need to be repositioned, here are some items to keep in mind to help make the entire transition easier and more successful.
Consider each brand’s pros and cons objectively
The brand consultancy, Landor, recently published their findings regarding rebranding following a merger or acquisition among the S&P 100 corporations over the last decade. While multi-billion-dollar deals are obviously going to be different from the smaller-scale acquisitions most American business owners will take on, the principles still apply.
One of the key takeaways from their study was the importance of a thorough, objective study of the brand equity on both sides of an acquisition with an eye toward consumer reaction following the merger.
When the acquisition in question involves a small or virtually unknown player being absorbed by a huge, ubiquitous brand (think Alphabet, Apple, or General Electric acquiring a hot tech startup or mobile app developer) then the results of this comparison will generally be a foregone conclusion: the smaller company announces how thrilled they are to be “part of the XYZ family” and the mega brand’s name and logo gets applied to everything immediately.
However, when a merger or acquisition is more a pairing of equals, or where one brand’s strengths heavily complement the other brand’s weaknesses, this evaluation becomes a little more complex.
“Ideally, this evaluation should take place concurrently with other financial evaluations before the deal is announced,” says Louis Sciullo, Executive Director of Financial Services at Landor, “Bringing in the CMO or others on the marketing team early in the process can help a company better understand how to approach an audience after the deal closes.”
There’s no room in this evaluation for sentimentality or purely personal preference. The focus needs to be on how your current and future customers are most likely to view the company after it’s been acquired and what marketing strategy is most likely to produce positive ROI in the long term.
Examples of when rebranding is likely the best choice
Limiting our discussion to small-to-medium-sized businesses (SMBs), the following examples illustrate situations where rebranding or repositioning of the new company probably makes a lot of sense:
- The acquired company is failing – Regardless of the reasons behind the failure, if the company you’re buying is well known to be struggling financially, facing legal trouble, or for some other reason appears poised to “crash and burn,” you’ll want to rebrand the company post-acquisition so you can start things back up with a clean slate in the public’s eye.
- The acquired company has a poor reputation – Even if the business you’re buying is still solvent, they may have a poor reputation in the community and/or their industry. This could be due to poor customer service, inadequate quality control, or questionable business practices. In any case, simply advertising that the business is now “under new management” is unlikely to be sufficient to reverse whatever harm has been done. A full rebrand provides the opportunity for a fresh start.
- The acquired company is relatively new and/or small – If, for example, you own a thriving chain of six neighborhood grocery stores within a 30-mile radius and you decide to purchase a privately owned grocery store that just opened up last year in a nearby town, it probably makes sense to rebrand the new store as the seventh location in your chain rather than trying to preserve whatever brand equity the current owner has built up over the last several months.
- You plan to make sweeping changes to the acquired business – With all of the above circumstances aside, if you’ve evaluated the current and future situation for the company you’re purchasing and you’ve decided that major changes in the product line, service offerings, or other core business features are required, rebranding the business likely makes good sense. After all, even with positive brand equity, the brand you’re purchasing likely has little or no connection with what you’re going to be doing going forward.
Examples of when repositioning may be a bad idea
There are also a number of circumstances in which rebranding or repositioning an acquired business could end up being a costly error:
- The acquired company has a long-established history in the community – Going back to our grocery store example from above, if the location your chain acquires has been a treasured fixture in its community for 60 years and holds a special place in the hearts of the locals who make up the bulk of their customer base, why mess with a good thing? It’s probably best to downplay the change of ownership as much as possible and play up the store’s existing brand equity and goodwill as much as you can.
- The acquired company is unique in the strength of its brand – Whether the company you’re acquiring is currently succeeding financially or not, if their brand image is so strong and well known, and has significant customer goodwill attached to it, sacrificing it makes little sense. This is often the case with entertainment venues, restaurants, and other businesses where customers associate an event or some emotional experience with the brand itself.
- The acquired company is the undisputed leader in their niche – In some cases — whether due to marketing excellence or just good luck — a relatively small or poorly managed company may still have carved out an undisputed position within their business or geographical niche. If nearly every current and potential customer associates that company’s brand with the product or service type they sell, the current brand’s value is likely far higher than any rebranding effort could make it.
It’s important to note that all of the above principles apply equally well when looking at your own existing brand or position (assuming you’re acquiring this new company to add on to business concerns you already have, not as a first-time entrepreneur.)
Whether or not your company is larger, more successful, or more well-established than the company you’re acquiring, if that company’s brand equity is higher for the reasons described above, it may be wise to consider rebranding or repositioning your existing business to take advantage of the power of the brand you’re purchasing.
Either way, the decision to rebrand or reposition following a merger or acquisition shouldn’t be taken lightly. It will have a significant impact on the future success of your venture, and can even mean the difference between an acquisition that ends up successful and one that you look back on with regret.