Evaluating the assets of a potential acquisition is one of the fundamental components of any due diligence process. However, in the midst of conversations around capital equipment, intellectual property or financial resources, brand can be left as the forgotten asset. Oftentimes, the topic of brand comes up only after one of the following occurs:
- The acquired company’s brand brings extensive, negative baggage that threatens to taint or conflict with the acquiring company’s brand health and perception
- The product integration process turns out to be far more complicated than anticipated
- The acquiring company doesn’t recognize potential brand strategies that may reinforce or strengthen the post-acquisition company position?
- The acquiring company acquires a redundant brand and product portfolio without a good perspective on how to integrate
These issues can complicate or burden an otherwise healthy acquisition. To get ahead of them, acquiring companies should integrate brand assessment activities much earlier in their due diligence process.
The first step is to incorporate a brand assessment into the due diligence process. The aim is to get a fundamental understanding of what value (or potential baggage) you’re getting with the acquisition. These insights will help avoid many of the pitfalls mentioned earlier.
Once you’ve developed a baseline understanding of the current brand and product’s current position, you’re now able to better evaluate the attractiveness of the acquisition. Along with the more traditional due diligence evaluations (tangible assets, operations, financials etc.), you are equipped to answer some core questions:
- Does this company’s brand(s) and products complement or conflict with our current brand and product offering?
- Does this company’s brand(s) and products strengthen our company’s overall strategic position in our market?
- Does this company’s brand(s) and products position us to play in a new market and/or appeal to a new customer base?
The answers to these questions will serve as valuable inputs into determining how attractive the acquisition is from a brand perspective.
Assuming the evaluation stage leads to a green light to move forward with the acquisition, a transition plan on what happens with the brand and products once acquired will be needed. The transition strategies available typically fall into one of two categories.
The most appropriate post-acquisition strategy will vary and will depend on numerous factors unique to each acquisition. Generally, the core considerations used to narrow down the overarching goals boils down to the answers to two questions:
- How much value and equity do the brand and/or products bring?
- How do the brand and/or products fit into the existing portfolio and strategy?
FedEx’s 2004 acquisition of Kinko’s is a popular example of a successful acquisition where brand was in the forefront of the due diligence process. As a result of careful up-front planning and evaluation, FedEx successfully transitioned both Kinko’s customers and its brand’s equity to FedEx in a way the strengthen FedEx’s market position. This was just one example of how incorporating brand assessment into the due diligence process will improve your efforts of both selecting the best acquisition targets and successfully integrating them into your existing portfolio.