The news about a company’s merger and acquisition activities affect stock price, and much more than what we read. This news should indicate the importance M&A integration in terms of speed and efficiency.
All kinds of critics weigh in with opinions on potential good or bad outcomes. But, what really goes on as the acquiring company moves forward?
Visibility and actions eventually fade into history as running the business takes precedence in the day to day activities that occupy leader’s time.
One rarely reads, or hears the inside issues and challenges required for successful M&A integration of one company into the culture, the infrastructure, brand and product portfolio of the acquiring company.
The most critical success factor is how effective and efficiently an acquisition integrates products, brand and culture into the acquiring company’s organization and portfolio. Once the acquisition is completed, the real work begins.
Truth is that M&A integration is a process that has hidden challenges that reach deep and wide in both organizations. This includes the product line, the brand portfolio, and the culture shift from injecting new organizational DNA.
Marketing or the CMO takes the lead as the CEO’s strategist on how to monetize return on investment (ROI) by aligning every aspect of the organization around the changes necessary These changes affect finance and accounting, operations, sales, research and development, human resources and more.
Why the CMO? Acquiring a company is a strategic decision. It adds value to the acquiring company, and that instantly created value must be converted into captured value as soon as possible, and without distracting from the programs, plans and initiatives in place at the moment.
Approach with Purpose
An acquiring company rarely buys another company to switch to their brand. Most often, acquisitions are to ultimately fill a product or service gap in the present portfolio.
Frame the M&A integration as swiftly setting or solidifying the future vision and mission for the company. Tactically this changes and improves the product portfolio, corporate brand, and culture. Having a pervasive strategy ensures everyone understands how to forge forward to ensure success from the financial transaction.
The acquiring company needs to assess differences and work to eliminate them in order to maximize product, brand and culture momentum. This can be painful, but it is required. Begin these processes immediately, the sooner they are done, the faster the ROI.
Don’t assume an acquisition will integrate by osmosis. Many of press announcements infer it’s possible with statements like: “our cultures are so close” or “our product portfolios fit so well.” That’s good PR, but rest assured, M&A integration is a real project requiring real work.
Effort around acquired product and company brands should go toward elevating the acquiring company’s corporate and product brands. This is the fundamental purpose of an acquisition and should be the primary business goal of M&A integration.
Interesting and contrived approaches to integrate brands result in misguided attempts to preserve brand equity from the acquired product. This is a huge time, energy, and cost drain on the company, making an acquisition cost more than the initial price.
There are two points here. The acquired company has a corporate brand, and that must be diminished and subsumed by the stronger acquiring company’s brand. The second point is that product brands must make necessary adjustments to fit in the product brand portfolio, as swiftly as possible. To do anything else results in broader brand dilution.
When GE or Boeing acquires a company, they don’t go back and forth on whether the name GE or Boeing will be replaced by the acquired company brand – even if it is debatable as to the stronger brand. Swiftly, and immediately, the acquired corporate brand ends.
The acquired product must fit into the product portfolio. That involves changing product names, packaging, and its user interfaces and experiences to match the acquiring company’s The sooner it is done, the sooner the whole product portfolio moves toward the synergies and goals for the acquisition in the first place.
The acquiring company likely has a product naming and brand framework that clarifies how a new product/brand is added to the product portfolio. Extensive frameworks define rules for product positioning, messaging, and whole-product corporate messages. They may be tied to a brand standard including color and design and other rules.
Culture is often described as “what people do when no one is looking.” When acquiring a company, you want to optimize the organizations to accelerate returns on the investment. Don’t assume your strategy is pervasive for an acquisition, make it a pervasive strategy. Take action such that everyone will “know what to do” and to ensure that it is done.
The company’s culture will shift, but it should shift with leadership’s guidance. Westinghouse shifted to become a nuclear electric power company, as their assets and markets shifted in the middle of the last century. The organization changes to realign with the CEO’s agenda, the corporate vision and mission, and company goals and objectives – as they change.
- Outbound field marketing activities must be aligned around the new complete product and services portfolio. They must leverage the new strength that the corporate brand expects to gain from the acquisition.
- The sales organization must be trained on selling the new product in the context of the whole product and service offering. Most important, sales people must have incentive in their compensation programs to sell the new product and service to customers. Without that, human nature will sell what they know and this may not align with the corporate objective for the acquisition.
- Operations must engage to find synergies for production. Along with finance, there are efficiencies to be assessed, and then capitalized. Changes to infrastructure as simple as moving everyone onto a single email system may seem less urgent. However, they are an urgent catalyst when leaders are moving culture in a new direction. Operations and infrastructure alignment is the pipeline to drive company policies, procedures and the Code of Business Conduct alignment and compliance across the collective organization. Consider the importance of speed in terms of integrating business models, invoicing, and collection of revenue.
- Human resources as a support organization must be involved. As things shift, there will be redundancies, and these must be handled carefully. If the CMO is building a business strategy to maximize the long-term sustainable value creation from the acquired company, it must have human resources support to achieve these in a swift, equitable, and people-sensitive way in support of the broader corporate brand’s recognition for treating people fairly. This is sensitive, but if business objectives are held at the highest level, the uncomfortable steps will go forward as best as can be expected. The CMO leading the integration can align public relations to position changes that affect people, operations, and products in the best light in support of the company’s objectives. Like good legal counsel, human resources’ role is not to determine the business strategy, but to “enable the strategy as it pertains to people, and to complete it swiftly.” This enables the company to put all energy into moving forward.
I have only touched on these larger points in terms of culture. Framing a company’s functional activities around setting the culture such that people know what to do when no one is watching is the required mindset.
Short Marketing Answer
Recently (and timely with this post) a colleague queried input on several options for integrating a brand portfolio. The options presented were very marketing-centric. Too often, CMO’s don’t see the larger impact of the assignment in terms of the corporate business objective for an acquisition. It is never a tactic, M&A is strategy. Marketing must frame their participation in M&A in terms of strategic contribution, not tactical activity to complete and then get back to their regular job. My response was apropos for this blog post, I think.
You are not just setting the course for the brand; you are setting the course for the future culture of the company, with this challenge. I would frame both the project, and the direction to the CEO around this point.
The approach I recommend is to eliminate the COMPANY brands entirely (in the case aligning of multiple acquired companies all with different corporate brands). There is rarely synergy with multiple company brands and the cost to maintain them. Complex tiered arrangements brand frameworks may have high costs that exceed the perceived value and clarity. Simple is better. Moreover, the culture of the company will stay in silos, anchored to their own identities with compounding cost. That last point will cost the company nearly all the gains they expected to realize from the investment in the acquisition. This is basic PE and M&A guidelines that I’ve lived for 25 years.
Any decision / choice you make in your challenge should and must be aligned with the overall goal of the CEO that made the decision to make the acquisitions. I’ve never known a CEO that doesn’t align M&A with both ROI and Profit, hence any cost to maintain multiple company brands is going to be difficult.
I recommend that you maintain the PRODUCT and SERVICE brands, and build a brand framework, like that you have suggested in 4. That is where the messages can and do end up resonating with the customer: “Company acquired Company for certain assets to build a stronger portfolio of products and services to serve you, our customer…”
A recent project took a sub 100 million PE buyout, made up of 9 acquisitions, and repositioned it as a single company. The only acquired brands we kept were product brands. The result was a $1 billion dollar exit. And, huge efficiencies across the board, most notably being the alignment of culture behind the single company brand. It became the trigger to know where to downsize, and optimize.
Again, David, position your rebranding initiative as resetting the company culture for the future growth of the company, which includes optimization quarter over quarter of operations, finance, sales, human resources, and ultimately the refinement of the vision and mission.
Cheers, Andrew Stein
I’ve led or participated as a team member for an M&A integration, a number of times, and have seen it work well and experienced failure. I remember the bear hug I received from Carol Bartz in the board room one time, for a successful integration project that resulted in the creation of a new vertical division at Autodesk.
It’s a great feeling when everyone is aligned and expected outcomes are achieved. The successes always occur when the objective is to accelerate the market return, and Marketing puts the strategy in place to achieve that outcome. The failures occur when decisions are made that do not take the business objectives as the primary drivers. One cannot avoid the pain.