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In the latest blockbuster acquisition in the technology world, Salesforce has signed an agreement to purchase Tableau for $15.7 billion. This is yet another massive acquisition in the industry, where the size of these deals seems to only be growing. Salesforce is not the only technology company that has accelerated its growth via acquisitions. The largest technology companies, with a few notable exceptions, have all expanded their offerings and solidified their competitive advantages via mergers and acquisitions.
It can be fascinating to watch the way that enterprises like Salesforce, Google and Facebook manage their digital brand and messaging. Some organizations prefer folding a brand into the parent company like Google has done so many times, while others favour maintaining a standalone subsidiary, as Facebook did with Instagram and WhatsApp. Amid mergers and acquisitions, regardless of their approach, these enterprises all face variations of the same challenge - preserving their digital brand. When your business is in the business of buying businesses, how can you ensure that your digital experiences live up to expectations?
Notable Merger and Acquisition Branding Failures
Managing a unified brand amid mergers and acquisitions is a challenge, regardless of your organization’s strategy. There are many notable stories of failure and many more businesses that are still struggling to overcome this roadblock.
An excellent example is eBay’s purchase of Skype for nearly $2.6 billion in 2005. The strategy behind this acquisition, from eBay’s perspective, was to provide their buyers and sellers with a global communications tool that was “superior” to email. The ability to communicate via voice-over-IP was meant to enable seamless interactions and instill consumer confidence in each transaction. While critics of the acquisition point to the sufficiency of email as the primary reason for its failure, there is a branding lesson to be learned here. What if eBay had embedded Skype into its core product offering? By unifying the brands and, more importantly, the experience, eBay could have made the VoIP technology a default communication channel for buyers and sellers. Embedding the technology into the eBay website experience would have encouraged greater adoption, rather than forcing users to visit a website or application. In the next section, I highlight how Salesforce has been able to achieve this synergy successfully, and what it has meant for the massive cloud software company.
In 2005, Sprint and Nextel encountered a similar problem amid a $36 billion merger. As the third- and fifth-largest US wireless carriers at the time, it seemed that the merger was destined for success, providing the newly-formed Sprint Nextel an opportunity to skyrocket to the top position among wireless service providers. While this deal was marred by numerous problems, the biggest hurdle for the brand to overcome was disparate technology environments. Initially, Sprint Nextel wanted to migrate former Nextel subscribers to Sprint’s CDMA network. After that process proved particularly painful, the organization pivoted and embraced both networks for a time. At that point, however, the merged business was hemorrhaging customers as they defected to competitors. In this merger, it’s evident that managing multiple technology platforms is a sensitive issue at best and a dealbreaker at worst.
Technology environments can be difficult to merge, but sometimes the barrier starts with basic customer service. This was the challenge for US Airways, having played a role in two mergers with rocky starts. Today, US Airways is part of American Airlines, but the airline was on the other side of a merger in 2007, being the stronger brand that was maintained over America West. When US Airways and America West merged, chaos ensued. Booking systems were not connected, airport kiosks were not functional and customer service agents could not communicate. Passengers were passed between the two airlines’ customer service agents, even though they had become a “single” entity. Lineups grew as agents struggle to provide passengers with complete or accurate information. Even behind the scenes, unifying technology environments and processes is a crucial step to delivering on customer expectations amid a merger or acquisition.
We’ve highlighted how mergers and acquisitions can go sideways, particularly because of technology. So how can businesses avoid disaster and preserve their digital brand while merging multiple brands? Let’s take a look at Salesforce for some ideas.
Unifying your Brand with a Technology Ecosystem
Salesforce has grown to be one of the largest technology companies in the world, due in no small part to acquisitions. The importance of brand unification is not lost on the tech giant. The advantage that Salesforce holds over competitors is largely because of the Salesforce Platform. All of the products that the organization sells are meant to coexist seamlessly within a single ecosystem, encouraging customers to purchase Salesforce products over those of competitors. Without flawless integration, Salesforce would lose its edge in the market.
When the technology company acquired ExactTarget in 2013, they moved quickly to rebrand it as Salesforce Marketing Cloud. The decision was a branding one, as Salesforce thrives on the notion that all of its applications are part of the larger Salesforce Platform. The reality was that it took much longer to fully integrate the two technologies. While Salesforce Marketing Cloud always played nice with the Salesforce Platform, full integration has not yet been achieved. For example, Pardot (an ExactTarget product) only became a Lightning App in mid-2018, meaning that it is now part of the “native” Salesforce experience. For now, it provides a similar user experience to other Lightning Apps, but under the hood, Pardot is still a standalone application that is integrated, but not technically part of the Salesforce Platform. This is where the importance of branding comes into play. While more technical users can see that Pardot is not part of Sales Cloud per se, the average user wouldn’t know the difference. With some clever UX and styling, Salesforce has made Pardot feel like part of the platform, even when it doesn’t exist natively as a platform entity. This is a sample of the magic that Salesforce employs to unify its technology ecosystem and make it feel like a unified entity.
In the digital world, customer experience is everything. It’s not enough to tell your customers that your merged brands are one in the same. Your audience has to feel it. High expectations can result in enormous challenges for your digital team, especially when consolidating brands. The first step for many organizations is to ensure that, much like Salesforce, all their digital platforms work seamlessly together and feel like part of the same brand. Salesforce’s road to platform-as-a-service dominance has not been free of potholes. What is clear, however, is that the technology giant prefers to absorb the brands they acquire, rather than keeping them at arm’s length. This strategy works for Salesforce because they have built a single platform that holds dozens of products and services. A different organization might take a different approach to its merger and acquisition strategy. Let’s investigate the merits of different branding approaches to these deals.
The Path to Branding Success in Mergers Acquisition
What makes a successful merger or acquisition? A study by Richard Ettenson and Jonathan Knowles revealed that there are 10 different branding strategies used in mergers and acquisitions. In reality, only 2 of these strategies are commonly used: one of the brands is folded into the other and disappears, or the two brands continue to exist independently of one another.
Our research reveals that, in many cases, the corporate brand strategy receives serious attention only after a deal is approved or the merger is announced. Under such circumstances, the re-branding becomes part of a post-acquisition cleanup in which the driving question for marketing executives is, “How are we now going to make this deal work?” But by then, it may be too late, especially if employee morale, customer satisfaction and the new entity’s share price have already plunged.
The study reveals that due diligence processes do a great job of evaluating tangible assets, like property and equipment. The processes also excel at evaluating some intangibles, like patents. Evaluating brand value and customer goodwill are another story entirely. In developing a branding framework for mergers and acquisitions, the authors recommend including branding in a merger or acquisition strategy. After all, the author’s assert, 80% of the S&P 500’s value comes from intangible assets. The study emphasizes that the 10 strategies commonly used can be grouped into four categories. Let’s quickly review these categories.
Backing the Stronger Horse
Backing the stronger horse means that in some way, the two brands are merged under the name of the stronger brand. According to the study, this option represents 40% of mergers and acquisitions. This option is a simple one, not only in execution, but also in approval. The low complexity of folding one brand into another makes it appealing to executives that are comfortable with their current brand and strategy. Furthermore, this option can be positioned as a boon to the customers and investors of the weaker brand, as they now get the perks of being stakeholders in the stronger company. The trouble with this approach lies in employee and customer morale. Customers report dissatisfaction for as long as 2 years after their brand is folded into another. Employees are destabilized and fear for their job security. We highlighted this in previous examples, where US Airways absorbed America West and where Sprint and Nextel formed Sprint Nextel while attempting to bring Nextel customers onto the Sprint network.
Best of Both
Best of both is also a common merger strategy, where the two brands become a new, merged entity. Think of Molson and Coors becoming Molson Coors as an example. This merger strategy is a proclamation to employees and investors of “combined corporate strength and enhanced competencies.” By maintaining multiple brands under a conglomerate, organizations can maximize market share. While Salesforce often rebrands its acquired entities, it still employs this strategy by leveraging new technologies to expand market share in the business and marketing technology world. So what do you lose under this approach? The authors indicate a lack of integration and loss of differentiation. By maintaining separate brands under the conglomerate, it becomes more difficult to capitalize on synergies, as eBay discovered when acquiring a wildly differently technology in Skype.
Different in Kind
This strategy is certainly the most resource-intensive of the bunch, but it delivers a strong message to investors and employees. This method is frequently used to deliver a new vision, whether a global expansion or a new business model. When Bell Atlantic merged with Nynex in 2000 and formed Verizon, the new brand name was meant to signal a new direction, linking vertical integration and the horizon. This is also possibly the riskiest of approaches. By launching a new brand, organizations sometimes “discard” the existing brand equity held with customers, employees and investors. For this reason, organizations have to be certain that the new brand will be more valuable than those that are merged.
Business as Usual
This strategy is exactly as its title describes. Business as usual means that the merger or acquisition was carried out for strategic or financial reasons, but the entities continue operating separately. There is no demonstrable change for either organization, aside from occasional supply chain or support synergies. This approach is low-risk in the sense that very little will change for customers, employees or investors. Furthermore, a new brand strategy doesn’t need to be implemented. An example of this is the merger between Procter & Gamble and Gillette.
There are a number of different strategies for merger and acquisition branding. The right approach is dependent on a number of variables, and success is never guaranteed. However, the thing that you always have control over is your digital brand. Regardless of the method you choose for your merger or acquisition, it’s fundamental that you develop a digital strategy to communicate with stakeholders about the changes. We’ve highlighted how Salesforce manages their technology ecosystem to execute brand acquisitions. Let’s review some other examples of merger and acquisition branding in the digital space.
Stakeholder Communications in a Growing Global Brand
An example of a success story in mergers and acquisitions is the global retail brand Alimentation Couche-Tard (ACT). The organization has grown over nearly 40 years via numerous acquisitions, expanding their brand across North America and into Europe. The ambitious growth strategy has cemented ACT as a global leader in the convenience retail market, but it has also introduced a new challenge. How can a global company create a unified brand across thousands of franchises covering half the world?
The answer was the world’s largest Drupal intranet. The ambitious global portal was designed to connect over 130 000 employees and give ACT the ability to unify its brand and deliver consistent customer experiences the world over. By connecting franchisees with one another, they were empowered to share best practices, reuse content and strategize on customer experience initiatives. The objective was never to shoehorn franchises into the existing ACT brand. Rather, by building a community, the organization allowed all employees to connect with one another, and gave them the tools to improve communications, enhance the brand and grow the business.
Unifying Technology Environments Across Brands
Disparate technology environments can create a variety of problems. In Sprint Nextel’s case, it made it impossible to amalgamate two customer bases. For US Airways, it represented an inability to manage booking made on two different airlines that were now merged. When delivering branded experiences to customers, technology matters. This is a fundamental driver behind OPIN’s work with one of Canada’s largest school boards.
The school board encompasses over 100 000 students in primary and secondary education. As such, there are over 200 disparate websites representing each school in the region. Each school had the ability to manage its own web presence and run its own site. Naturally, many problems arose. Costs were astronomical because there were so many different CMS technologies running the sites. More importantly, the school board was not able to provide unified branding and messaging to all of its constituents. The problem was amplified by the rapid growth of the school board, with 1 of every 3 schools having been agglomerated in the past 20 years.
When OPIN was tapped to help the school board unify its technology ecosystem, the objectives were clear. The board wanted to reduce costs and make it easier to maintain its technology. Communications would be streamlined and user experience would be better aligned among the schools. While the school boards would retain autonomy over their digital presence, the school board would be able to unify the entire region of schools into a single brand and message.
The purpose of a merger or acquisition is almost always to accelerate the growth of your business. Growing your business is only possible with the right marketing and communications strategy, whether you are acquiring another business or not. Without creating that synergy between brands, your customers will never feel like your brands were ever merged, and your digital team will be unable to deliver effective experiences to your audience. As we’ve learned, accomplishing this is not a simple task, even for some of the world’s largest brands.
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