Winning the Brand Game Can Supercharge Your M&A Results
For acquirers of organisations, either Private or business Equity (PE), its not precisely a fantastic time to be buying services and putting bets on brand-new frontiers. A recent Price Waterhouse Coopers report discovered that the uptick in acquisitions and mega-mergers seen in 2019 will continue into the new years. This suggests high purchase rates will stay in their stratosphere for the foreseeable future.
As a result of high purchase-price multiples and excessively ambitious earnings growth plans, the landscape is cluttered with the remains of deals gone south or sour. More than half of designated acquisitions fail, and 80 percent fall short of expectations. To secure themselves versus failed deals, Corporations and PE have reacted to inflated purchase price multiples by doubling down on pre-merger and pre-acquisition due diligence.
While monetary engineering of the balance sheet and identified operational enhancement opportunities (lean, supply chain, and so on) have actually definitely helped reduce purchase rate danger, one frontier that has actually traditionally been disregarded is marketing– particularly branding. While the reasons for this lack of understanding are numerous and lots of, we can share from experience that one frequent element continues to contribute in a lot of the sad M&A stories that we dissect– a lack of a branding technique.
Creating and carrying out a reliable pre-acquisition and/or post-acquisition branding method– one which interacts and records that brand-new story and increased value to the marketplace– in our view can make all the distinction in achieving M&A success. Searching for synergies and complementary strengths to create new or enhanced worth through branding has now become the preferred game strategy to win.
The Importance of Brand to Pre and Post-Acquisition Success
An effective pre-acquisition due diligence brand name assessment helps to validate or invalidate the acquisition thesis. We often see that it supplies a much better understanding of the target companys intangible properties, increasing the precision of the company appraisal. Similarly, it recognizes strength and weak point in areas that might affect earnings capacity.
Analysts and managers involved in M&A activity tend to attempt to inform the value story by metrics alone. Experienced at functional optimization and finest practices, todays M&A professionals tend to take a look at metrics that drive performance, consisting of performances from integrating core functions, and the advancement of a leaner supply chain procedure.
But the story of a successful M&A plan today can not simply be informed by metrics alone– the brand must play a crucial role. Think about the obstacles faced in a current acquisition by eFolder, an IT services provider in the managed providers (MSP) space, which failed to stress brand name in supporting the merger. The resulting confusion consisted of:
Neil is a Chief Outsiders Partner and CMO. With a performance history of executive management and marketing success, he assists early phase startups, mid-sized and large, publicly traded business develop and carry out detailed and integrated marketing methods to accelerate growth. Neils holistic approach to marketing powers effective marketing plans, increased lead generation and conversions, product or services revenue growth, and enhancements in business efficiency and profitability
Peter Hlavin, Vice President Business Development Chief Outsiders.
Peter has over 35 years of concrete organisation building experience, consisting of growth, strategy, investment, and marketing/operational enhancement. His marketing and operational consulting, Private Equity, and M&A experience is spread out throughout a varied range of organizations and industries. In his role as Vice President, Peter leads the Private Equity business development activities for Chief Outsiders, assisting produce value for the portfolio companies of PE firms during their financial investment lifecycle, including pre-acquisition due diligence and post-acquisition assessment and implementation
Chad Nelson, Brand Strategist/Creative Director The Basis Group.
Chad has more than 20 years of imaginative experience in state-of-the-art, B2B marketing, brand development and graphic style. He has been a trainee of brand development for many years and played the primary role in the advancement of TBGs proprietary branding approach
The story of a successful M&A plan today can not merely be informed by metrics alone– the brand must play a key function. Often overlooked, post-acquisition brand management is sadly viewed by numerous as an expenditure. Chad has more than 20 years of imaginative experience in state-of-the-art, B2B marketing, brand name development and graphic design. In his role as innovative director, Chad oversees all innovative development and works as business branding strategist. He has actually been a trainee of brand name advancement for many years and played the primary function in the development of TBGs exclusive branding method
Merged entities operating individually
Various target audiences and sales approaches
Differing product roadmaps
Conflicting corporate cultures
Absence of a single business identity/name for the merged business
Frequently overlooked, post-acquisition brand name management is regrettably seen by many as a cost. The signs of the ignored or avoided brand name management consist of a failure to ask, or confusion about the responses to, basic questions such as, “Who are we?” and “What are we selling?”
The resulting internal results frequently consist of a baffled and nervous workplace, low spirits and bad employee retention.
The external effects of bad post-acquisition brand management arise from broad client and market confusion and concerns. A loss of brand name equity, plunging and defecting customers enterprise worth quickly follow.
Merger Potential Unrealized
2 years post-acquisition, eFolder and Axcient had actually merged on paper only. Each business ran individually under the name eFolder/Axcient, in the exact same market– however with various target market and opposing business cultures. Some in the market questioned the move.
One obstacle the brand-new entity dealt with was that few of the bigger MSP potential customers understood eFolder. With fading industry self-confidence that the marital relationship might work, the merged company failed to fulfill its income and share objectives.
As we observed here and somewhere else, the combined internal and external results of bad M&A brand name management have the potential to stall a business marital relationship and spoil stellar portfolio performance. Eventually, they contribute to the high rate of M&A failures.
It need not be so. With an intensive branding effort, combined entities can recognize their full potential. As we will see with eFolder/Axcient, “Rebranding the combined business unlocked considerable value that was not recognized in the initial merger,” stated Angus Robertson, Chief Revenue Officer of Axcient.
A Closer Look at M&A Brand Management
Offered the high rate of M&A failures and historical PE playbooks focused on functional and monetary optimization, the role of pre and post-acquisition brand management should be examined. To be sure, every effort should be made to prevent the destructive internal and external outcomes of bad M&A brand name management.
This post is the first in a series that will take a better take a look at the impact of unprioritized or inefficient M&A brand name management. In future installations, we will more closely analyze external and internal impacts to demonstrate why brand plays a significant role in raising the M&A success rate and increasing exit appraisal multiples.
Neil Anderson, Partner & & CMO Chief Outsiders
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