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Successful rebranding strategy
According to the Harvard Business Review, “somewhere between 70-90% of mergers and acquisitions result in failure”. This staggering statistic is even more baffling when considered alongside 2017’s biggest M&A deals so far.
With takeovers as astronomical as Johnson and Johnson’s recent $31.3 billion deal and companies spending more than $2 trillion globally on mergers and acquisitions a year, there’s a lot to play for in the M&A world. So with so much at stake, how are businesses getting their rebranding strategy for mergers and acquisition so wrong?
This year’s most infamous failed merger provides some telling insights. In February, Unilever fought off Kraft Heinz’ $143 billion takeover, averting the second biggest acquisition in history. The failed formation of an FMCG superpower and Unilever’s high profile rejection of the merger, has often been pinned on a clash of company cultures and brand values. Unilever’s pledge for investment in sustainability and its long-term brand positioning strategies proved incompatible with the quicker-fix focused practices of Kraft Heinz.
What the Unilever-Kraft Heinz saga highlights is the risk companies face when financial gains sideline a crucial rebranding strategy for mergers and acquisitions. Short-term profits may follow a new logo or company restructure, however if brand values and identities don’t align with long-term business objectives, at best the takeovers or joint ventures miss out on maximizing the power of their new allegiance and at worst, deals are set up for inevitable failure.
As anyone working for a company undergoing a merger or acquisition knows, it’s an exciting but unsettling time for all those involved. Major restructuring usually occurs which is another major contributor to the identity crisis experienced by newly merged entities.
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2017 may be proving a testing time for mergers and acquisitions however it’s also producing its fair share of highly lucrative success stories. We take a look at rebranding strategy examples where businesses are conquering the M&A world; putting branding first to retain and grow brand identity throughout their takeover or merger.
L’Oréal: the beauty of the acquisition
The beauty industry has long been a hotbed for mergers and acquisitions. Shaped by an ‘acquire or be acquired’ model, 45% of today’s cosmetic market is owned by just three industry players.
At the helm of this global domination is French powerhouse L’Oréal. The 108-year-old enterprise claimed $28.6 billion in revenue last year, with business acquisitions at the heart of a 70% increase in sales over the past decade. The latest of these acquisitions – L’Oréal’s $1.3 billion takeover of CeraVe, AcneFree and Ambi skin-care in January, doubled the size of L’Oréal’s Active Cosmetics Division in the U.S and put the company leagues ahead of its competitors in the millennial-fuelled category of dermocosmetics.
For those outside of industry intel, it’s hardly surprising that L’Oréal holds the title of the world’s largest beauty company. Decades of business branding investment with strategic advertising and A-list endorsed products have made L’Oréal a household name. What comes as more of a surprise is that L’Oréal’s success lies with a portfolio of over 30 different brands, all but one completely acquired.
From Yves Saint Laurent and Giorgio Armani to Maybelline and ABB (African Beauty Brands), each acquisition on L’Oréal’s books has a distinct, individual and powerful corporate identity. The L’Oréal brand in all instances appears entirely separate. It is this empowerment of the individual brand rather than drastic rebranding after acquisition that CEO Jean-Paul Agon pinpoints as central to L’Oréal’s success: “We offer [acquired brands] the total respect of the identity, culture, spirit and soul of the brand.”
In a recent interview with Fortune magazine, Agon built on this importance of brand, citing Kiehl’s as a prime example of L’Oréal’s rebranding strategy for mergers and acquisitions. Acquired in 2000, Kiehl’s consisted primarily of a flagship NYC store and had an annual turnover of $20 million. 17 years later, Kiehl’s is now a global entity valued at $1 billion. In regards to its billion dollar transformation, Agon is quick to emphasize that L’Oréal’s corporate branding strategy was heavily focused on developing Kiehl’s original brand values: “When you go to a Kiehl’s store today anywhere in the world – in Korea, China, France, Argentina – it is exactly the replica of the spirit, of the soul, of the identity, of the Kiehl’s store we bought years ago. We have been more than loyal and cultivated the spirit of the brand.”
When implementing rebranding strategy for mergers and acquisitions L’Oréal prioritizes rather than sidelines investment in brand identity design. As Agon eloquently surmises: “the way we grow is exactly this combination of buy and grow. It’s not buy or grow… Once the brands have been acquired, they are brands that we build.” This ‘buy and grow’ approach, has allowed L’Oréal to dominate the beauty world, reaching new consumer groups, securing innovative technologies and accessing niche markets with a growing list of diverse acquisitions.
Read how Global healthcare product supplier, Coloplast, managed to streamline their brand relaunch with Templafy.
EE: starting with a level playing field
Just as rebranding strategy in acquisitions is often overridden by commercial strategy, the world of mergers can prove even more complicated. There are few examples of truly successful company mergers, in which two brands, businesses, cultures and teams of people come together in a joint venture where both parties retain equal influence and power and one does not subsume the other.
Take the telecommunications industry; when the launch of Apple’s iPhone collided with the rise of an online marketplace, the high street telecoms industry was destined for decline; forcing previously triumphant brands into a string of mergers and acquisitions.
AT&T’s acquisition of BellSouth and Vodafone’s acquisition of German company Mannesmann at the height of the .com bubble remain two of the biggest mergers of all time – worth $86 billion and an eye-watering $180 billion respectively. Yet these famous corporate branding examples saw two household names; BellSouth and Mannesmann, completely disappear and Vodafone eventually plunge to massive losses.
Two brands that bucked the telecoms trend however were Orange and Deutsche Telekom’s T-Mobile – two of the biggest UK household names in the 2000s. “The future’s bright, the future’s Orange” is among the most famous straplines in advertising history and saw the brand build huge equity over two decades. T-Mobile, claimed equal fame with marketing activity such as the ‘flashmob’ – now the go to option for any brand trying to make a viral video.
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Showing other brands how it’s done, the rebranding strategy for acquisitions and mergers adopted by these two brands was truly collaborative style, as seen in Orange and T-Mobile’s £4m co-branded ad campaign. Easing consumers and staff into the partnership, the global entities announced their union in a rare joint message which retained and communicated each of the two brand’s recognizable corporate visual identity. This remarkably transparent and candid approach retained and even built on the brand equity each company had built up over the years.
Fast forward a year and the clever co-branding strategy proved a key stage in what would be a longer term merger strategy, culminating in the two brands forming EE; a new brand launched around 4G technology with an enormous amount of marketing effort and fronted by Hollywood superstar, Kevin Bacon. EE succeeded in creating a brand that was new to market thanks to a well thought through brand architecture, built on five long years of carefully planned rebranding strategy to ensure long term stability. This diligence underpins ongoing success through to this year’s launch of higher-end products such as ‘EE class’.
The lessons of the telecommunications industry in the 2000s are crucial for any sector in a state of contraction and decline; the commercial opportunities of consolidation through mergers and acquisitions are great, but the fate of businesses with poorly planned rebranding strategy for mergers and acquisitions has the potential to see long-established brand equity wiped out overnight.
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What these rebranding strategy examples make clear is that to be successful and survive in the world of mergers and acquisitions, all parties need to be dedicated to developing strong brand identities.
As shown by L’Oréal’s ‘buy and grow’ strategy and EE’s five year plan, this is a continual and long-term process that goes beyond a logo refresh or new brand slogan. At Templafy we know this process starts with internal implementation. Just one look at L’Oréal’s internal brand culture, and you understand the importance of having a team that works together towards a united goal and are empowered through the support of their employer.
Effective internal employee buy-in starts by giving your employees the resources they need to correctly implement new branding elements. Giving busy individuals the tools they need to easily communicate your new corporate visual identity facilitates consistency and ensures brand compliance; with integrated software such as Templafy’s Brand & Compliance Checker validating communications for any off-brand visuals such as a distorted logo or font.
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Our automation tools provide end-to-end solutions to ensure brand identities are rolled out as intended across all channels. With Templafy acting as a central hub for all best practice templates, digital assets and brand elements, brand managers can update company visuals and templates centrally to ensure the newest version is used across all documents.
If you’d like to learn more about how Templafy can support your rebranding strategy for mergers and acquisitions, get in touch with our team:
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