The standard advice to companies thinking about a merger is that they should start getting business in order before putting the company up for sale. Traditionally, this has meant cleaning up the balance sheet, making repairs to the physical plant, and examining sales, expenses, liabilities, assets, and recent sales of businesses in similar industries and locations. All of this is supposed to present a more or less accurate “valuation”—the Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) value. While this measure is highly systematic, it can leave serious money on the table, since simple observations in almost any industry show that some businesses can and do actually sell for substantially more than the EBITDA value.
How can a brand development strategy add value?
Every business has a brand. A brand is a perception—it lives in the hearts and minds of the stakeholders. So even if you do nothing to formalize your brand, stakeholders will still develop an intuitive perception of your company, your products and their relative value. The trouble with an organic brand (one that grows totally on its own) is that the stakeholder/brand relationship is limited to the specific exposure a stakeholder may have to only a portion of your capabilities, which may be an incomplete understanding of the greater value your business really offers.
Sure, an owner can obtain an accounting valuation, determine EBITDA, set a selling price and put the company up for sale in a matter of months. That is a fairly simple and all-too-often standard process—but one that often leaves out other important sources of value. What makes the difference between traditional valuation practices and pre-M&A market value selling can be brand valuation and marketing communication.
In short, a business is worth however much someone will pay for it. Value, just like beauty, is in the eyes of the beholder. It is our job as brand developers and marketing communicators to understand and present the brand and its value.
So, what is a brand?
A brand is the understanding people have about the value a business provides. It is personal. Cumulative. Instant. Pervasive. Attitudinal. Responsive—or not. While it may seem that everyone thinks they know what a brand is, many people actually confuse it with just the logo. Certainly the logo is part of a brand—it is the visual representation—but the brand is much, much deeper than that.
Just as every individual has a personality, every company has a brand. The brand is presented through actions and attitudes that embrace the unique characteristics, behaviors, identity systems and relative value that each stakeholder thinks about when describing your business. Your brand is not so much about what you may want the brand to be as it is about the value each stakeholder perceives that he receives.
How pre-M&A brand strategies help to find a buyer
Finding an M&A suitor is like finding the Where’s Waldo? character in the children’s book: difficult to locate even though it’s in plain sight. Is it a strategic buyer? A private equity group? A competitor? Or a totally unknown offshore company from an unrelated market?
While a good business communicator writes to her audience, the wise business communicator (and the wise investment banker) expands the M&A buyer universe by leveraging the unique value message embodied by the brand.
The best pre-M&A messages begin at least two years before seeking a buyer and are tied to a brand development strategy. A brand development strategy provides the blueprint for building brand awareness and market expectations for performance. With a brand strategy clearly in place, the communicator is able to prepare messages that reinforce stakeholder values, increase customer loyalty and raise market expectations.
Gary Roelke, president of Corporate Strategy Advisors, CFA-NY, notes that “acquirers often use brand awareness as a measure in determining a level of purchase interest. It is almost a ‘given’ that a company with a strong brand is more well-known and highly regarded and is therefore valued at a higher multiple than other ‘generic’ companies in the same industry.” In the same vein, the attractiveness of the brand often garners multiple bidders who tend to raise price offerings to a higher level.
Brand strategies simplify post-merger communication
M&A announcements can breed confusion, mistrust and staff defections, stoking rumor mills and giving competition a free pass while the new entity tries to sort things out.
All too often, the newly merged business is left in limbo while management decides what to do with staff, products, plant locations and other internal issues. A savvy business begins to construct a brand integration strategy during the due diligence phase of the M&A so that on day one, it is ready to present a strong, customer-focused brand with a unified platform that presents value in order to rally employees, customers, suppliers, the financial community and other stakeholders.
The development of an early brand integration strategy clearly communicates a merged brand identity and addresses issues such as:
- What values will be presented by the newly merged brand? Will the purchasing company simply absorb the acquired asset and move forward with a business-as-usual, pre-M&A brand presence, or will management capitalize on the strengths of the acquired company to add greater value? If so, how will we present the brand strategy?
- Who will be responsible for formulating the brand integration strategy?
- How and within what time frame will we accomplish brand integration so that the new entity loses no time in maximizing its value objectives?
Both internal and external communications need to be prepared before the M&A announcement so that the brand can assume leadership and gain trust during the critical first few days of what is usually a highly emotional transition for all stakeholders.