M&A: The brand as a common thread
Today’s brand map will change dramatically in the next 3 years.
Today’s corporate climate is not an easy one to navigate. Amid a mere 2.9% projected increase in global GDP growth in 2023, a slow start to the year with M&A deals and looming fears of a recession in both the U.S. and U.K., it can be difficult for companies looking to carve out space for their new brand to know where to start. However, there is something that had the possibility to drive the consolidation, growth and international positioning of the world’s most valuable brands: mergers and acquisitions. In this article, we will go through examples of mergers in the financial, telecom, technology and even airline industries as brands are looking to make bold moves.
The 2021 merger of Bankia and CaixaBank significantly changed the landscape of Spanish brands. The 2008 financial crisis caused a jolt in the Spanish banking system, the landscape changing drastically in just eight years after a series of mergers and acquisitions that reduced the number of banks, consolidating a previously highly-fragmented and localized sector. This merger created the largest bank in Spain by assets (€664b in 2021)—now one of the largest in all of Europe.
Another financial merger of massive impact came in the form of Nexi—the leading Italian paytech company. When Nexi acquired competitors Nets and Sia, it was the biggest M&A deal in terms of size that an Italian company had ever completed in the history of the country (ca. €8b). Interbrand worked with Nexi to create a unified brand that would be ready for day one post-merger, presenting it as a leading brand of the cashless transformation.
We consider this deal to be a unique opportunity to create a European leader that leverages on a strong Italian footprint.”
Carlo Messina, Intesa Chief Executive Officer
Morgan Stanley, Truist, and AT&T: successful merger with the brand at the center
In the Americas, Morgan Stanley completed the acquisition of E-Trade Financial Corporation. As James P. Gorman, Chairman and Chief Executive Officer of Morgan Stanley said, “The addition of E-Trade positions us as an industry leader in Wealth Management across all channels and segments, and significantly increases the scale and breadth of our Wealth Management franchise, which now oversees $3.3 trillion in assets.” Ever since the financial crisis in 2008, Truist, the merger between BB&T and SunTrust, became the largest merger bank in the US. BB&T and SunTrust approached Interbrand to carry on with the idea of investing more in innovation and progress, but also because they wanted to seek a greater purpose. Their strategy consists of being the main financial institution of the future. Therefore, Truist invented a different way of banking. You can envision the purpose of the company simply by reading their name.
The telecom industry has undergone many transformative mergers. AT&T, whom we have partnered with for nearly 20 years, transformed into a new company when they made a worldwide expansion. One of their greatest movements was in Mexico in 2016. Their merger with DIRECTV became the largest pay-television provider in the world. Ever since the merger with SBC, AT&T continues as one of the main telecom companies worldwide. AT&T worked with Interbrand due to its continued demand for growth of network speed and capacity at exponential rates; its innovations fueled new ways in which people live and play. It was a perfect opportunity to evolve the brand positioning to help constituents better understand AT&T’s role and contribution. The new brand positioning and identity breathed new life into AT&T. It gave employees a clearer understanding of their role as an innovation company, instilled pride in all they do for society, and became a source of inspiration for internal agendas and delivery of the customer experience.
If we take a look at Interbrand ́s Best Global Brands 2022 ranking, we can observe that 5 technology brands—Apple, Microsoft, Amazon, Google and Samsung—are in the top 10. In fact, they make up the top 5 brands. There are some interesting acquisitions in the tech sector that have already been closed. Facebook, currently ranked at 17 in the 2022 Best Global Brands report, completed one of the largest operations in its history. The social network paid $5.7 billion USD for about 10% of the shares of Jio Platforms. Back in 2016, Interbrand created and shaped the Jio brand and experience along with the entire customer journey. A global team worked closely together on-site in Mumbai to create an ambitious brand that worked across literally millions of touch points. A diverse country with 1.3 billion people and every area reflected in a Digital Life. Interbrand was part of this team and worked to create Jio’s visual and experience strategy, developing a basic system into thousands of visual developments. Commercially launched in September 2016, the brand already attracted more than 100,000,000 customers, making Jio the biggest data carrier worldwide.
When it comes to M&A, no industry is an exception. In the world of airlines, many brands will disappear, while others will merge to survive. When LAN and TAM airlines merged, Interbrand’s economic market sizing model gave them the confidence to make a bold move: they would drop two highly successful national carriers and rebrand into a single, unified voice. This would create a bold new flagship intended to showcase the best of the region to the world, creating LATAM Airlines Group. While LATAM has faced recent challenges, an internal restructuring is set to charge growth in 2023.
Creating a successful brand merger
It is well known that a merger is not a bed of roses. While an M&A process marks one of the most exciting moments in any organization, encapsulating the promise of “more and better,” more than 70% fail to meet expectations.
There can be multiple reasons: lack of clarity in brand and business strategies; absence of a clear strategic plan to build an operational brand in the market; lack of in-depth understanding of the risks associated with consumer loyalty and sources of income; overlook the risks of cultural integration; failure in the identity of brand equities and sources of future growth, or poor evaluation and consideration of the relationship between consumer expectations and the brand experience delivered.
All these risks, which cross-affect the companies that are part of a merger, can jeopardize the objectives of the merger— whether they are to expand market share, improve the customer experience, increase shareholder value, attract better talent, reduce costs, increase revenues or expand into new industries.
The role that the brand plays as an asset is fundamental in increasing the chances of M&A success. Firstly, because its correct financial valuation is crucial in an ecosystem whose type of buyers has changed, since no longer only companies play, but also new players, such as investment funds, venture capital or hedge funds. A thorough analysis of the brand value must be a fundamental part of the total valuation of the business and, therefore, of the final investment of the operation.
When two or more companies with different brands merge, it is necessary to identify and activate synergies. Whether it is creating a new denomination or defining a new brand architecture, the future of the operation will depend on which brands remain, what role they play, which ones disappear, etc. When making these decisions, there are multiple factors to consider, including the evaluation of individual brands, as well as their relationships with each other and the ecosystem around them. Companies also need to factor in commercial concerns and analyze cultural, legal and logistical
considerations, as well as those related to customers—all without forgetting the influence of brands in the various markets or regions where they currently or wish to operate.
It is a complex process that requires a deep review of the conditions related to the market, the brand and the consumer— all while being very clear that the objective is not only to gain size and market share, but to build a new entity that can survive, stay relevant and respond quickly against multidisciplinary competition. If we take the case of the financial sector as an example, brands that come from mergers or acquisitions will have to face not only their peers, but relatively new players like Apple Pay or Google Pay, which are attractive and flexible alternatives for young consumers.
The knowledge and deep analysis of all these brand conditions will allow us to travel a path full of milestones. That, above all, depends on a clear understanding of an aligned purpose and ambition within both the new company’s business and brand alike. Without this fundamental ingredient, it will be difficult to evaluate and quantify brand architecture scenarios, develop a migration strategy with its corresponding transition plan, manage a new internal culture, measure costs, or define governance principles.
Key merger learnings for brands in 2023
Ultimately, brand is the common thread that connects employees with customers, as well as being the only differentiating asset over time. This is yet another reason to align brand and business and create a catalyst for profound transformation in search of growth when facing a merger or acquisition.
As we slowly exit the COVID-19 pandemic and enter a new sense of normalcy, mergers and acquisitions have been lower in volume than during the pandemic itself. However, experts predict an increase in deals in either Q2 or Q3, meaning opportunity is once again on the horizon. It is important to look to the future and constantly seek new challenges if a brand hopes to continually reign, as we have seen the Best Global Brands top 5 tech brands do for several years.
A merger is rarely simple, but it can be successfully navigated with time and ambition. The combination of understanding a company’s customers, a clear ambition, a well-defined trajectory, and a thorough planning integration strategy and purpose is what makes these mergers a success. It is a decade of possibility; every brand should look ahead and broaden their horizon.