Contemporary Perspectives on Corporate Marketing by Balmer John M. T.;Illia Laura;González del Valle Brena Almudena;

Author:Balmer, John M. T.;Illia, Laura;González del Valle Brena, Almudena;
Language: eng
Format: epub
Publisher: Taylor & Francis Group

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Corporate brand integration in mergers and acquisitions

Joachim Kernstock and Tim Oliver Brexendorf

Introduction

Most of the academic research on brand management focuses on stable organisational conditions. In the last years, markets have been characterised by disruptive changes as well as mergers and acquisition (M&A) activities. In cases of mergers and acquisitions, the question of choosing an appropriate brand strategy arises. The question of corporate brand identity is a key factor in ensuring a successful M&A outcome (Balmer and Dinnie 1999; Melewar and Harrold 2000; Bahadir et al. 2008;Knowles et al. 2011). Nevertheless, the role of brands is of different importance in M&As. Bahadir et al. (2008) report that 49 per cent of the firm value related to the purchase of Gillette was attributed to the equity of brands whereas in the acquisition of Latitude by Cisco System only 1.51 per cent was attributed to the brand (Bahadir et al. 2008). In M&As, brands are critical assets and often account for significant overall transaction value (Bahadir et al. 2008).

In research and practice little attention has been paid to the external benefits and brand management of mergers (Homburg and Bucerius 2005; Basu 2006). Some authors highlight the relevance of corporate visual identity (Rosson and Brooks 2004), brand name and brand logo integration (Knowles et al. 2011), and customer reactions to M&As (Thorbjornsen and Dahlen 2011). Especially, the integration of brands in M&As is widely neglected in the management of M&As. Articles that discuss possible corporate brand strategies in M&As are scarce (Brockdorff and Kernstock 2001; Ettenson and Knowles 2006; Jaju et al. 2006). This is surprising because it has been reported that many mergers fail because of neglecting the brand integration process. Balmer and Dinnie (1999) argue that the merger failure can be attributed to the fact that a narrow focus on financial issues exists, and crucial issues like corporate brand identity and corporate communication are neglected (Balmer and Dinnie 1999). Illia (2010) states that identity is often undervalued in management practice. Homburg and Bucerius (2005) pronounce that during the integration phase of M&As, managerial tasks are absorbed internally, which can lead to a neglect of the customer and brand perspective.

By merging companies, firms are involved in numerous demanding tasks of integration. One is the integration of corporate and product brands of both companies. Despite the importance, in practice often little attention is devoted to the integration of brands. Ettenson and Knowles (2006) found that in nearly two-thirds of deals, brand strategy was of low priority in pre-merger discussions. Sometimes the new brand is set almost in a short action prior to the announcement of the merger. In other cases, the issue of brand integration is neglected in the process of post-merger integration. As a consequence, the existing brand values may not be used or may even be destroyed.

The objective of our article is to contribute to the understanding of the integration process of brands in M&As. This article discusses alternative strategic options of brand strategies within a merger. We develop a framework that considers branding options in M&As.

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