On December 3rd 2014 this was the headline in major business papers and social media sites—Brickman And ValleyCrest Announce New Name-
BrightView CEO Andrew Kerin said. “BrightView reflects our optimism for the future and our drive to create greater value for our clients. It embodies our excitement to leverage the strengths of our combined company to enhance how we care for our people, our clients and our communities. It also enables our team members and clients to take pride in trusted relationships and solutions that matter.” OK, I understand that logic, but know have to ask the proverbial question….Is the name change and strategic direction of the Brickman/VC merger building a new brand or destroying two great company legacy’s?
In The Art of Merger and Acquisition Integration, a merger is a set of promises. Coincidentally, it is also often said that a brand is a promise. So what happens to brands during a merger or acquisition? How much consideration should be given to the corporate and product brands before and after the transaction? What must leaders and managers consider during brand integration? These are all the questions that I know where discussed and even challenged behind these closed doors..
The Challenges of Integrating Brands..Is there really a strategy?
Of all the assets exchanged during a merger or acquisition, the most important have to be culture and brand. Capturing the intangible value in transactions and growing that value through integration are sorely underestimated and poorly understood challenges. The result is that brand opportunities are missed entirely, not realized, or seriously under-leveraged.
A merger or acquisition represents a new opportunity to create a compelling, ambitious vision that is understood and shared to capture value not present prior to the transaction. This opportunity allows one to build a new brand and/or leverage the strengths of existing brands. These transactions attempt to capture two sources of value; the hard tangible goals established (cost reductions and revenue enhancement) and the softer intangible issues related to people, culture and brand. Q- The aforementioned is and will be critical to the long term success of the Brickman/VC merger, can this actually materialize?
Example; PricewaterhouseCoopers (PwC), itself a product of many mergers over the years, states that “cultures cannot be merged by waving a banner and proclaiming shared vision and values. Cultural change doesn’t come from newsletters, logos, screen savers, or posters. It’s not about hype, promotion, mantras or prayers.” PwC advocates creating a profile of desired behaviors that supports the business strategy. This profile is meant to represent all the positive associations attached to the brand. Q-Can the cultural behaviors of Brickman/VC be integrated for long term success?
The vast majority of merged companies underestimate the behavioral changes that must take place during integration. In order for staff to get behind the change they must understand the values the merged brand is to represent and that they are to live. Customers must understand the benefits associated with the merged brand and recognize that it solves problems for them that the previously individual companies could not. Q- Can a divided customer base become unified and will previous disjointed customers of either brand rejoice and reunite?
Failure to focus on behavior can sink a merger or acquisition. When Compaq purchased Digital and floundered, much of the problem was attributed to the unceremonious dumping of the Digital name, which still had equity. Instead it was decided to -all products and services as “Compaq.” Each side had a strong culture and pride in their individual brands so this move led to defections of Digital’s top talent. The Digital employees saw a good deal of value wrapped in their name – it had guided their behavior and defined their culture. As well, Compaq underestimated the passion and loyalty of Digital customers. Q- Does VC employees see the value in the new brand execution?
As we know; there are four ways a corporate brand name can change during a merger or acquisition. One party can keep its own name (Bell Atlantic over NYNEX), or it can assume the seller’s name (Primerica kept Travelers), or combine both names (PricewaterhouseCoopers), or create an entirely new name (USX, formerly US Steel).
According to Anspach Grossman, acquirers keep their own name roughly 85 percent of the time. Even though the Digital name’s disappearance had negative results, such a move does not have to result in a loss in value. For instance, in the case of the Chase Manhattan and Chemical Bank merger, Chemical was the larger in size and assets but the Chase Manhattan name was more fitting for the strategy. The loss of the Chemical name and corporate identity did not harm value because Chemical’s brand associations survived due to intelligent migration of the equity to the new brand.
The greatest threat to brand equity during a merger or acquisition can be determined before finalizing the transaction. Though no empirical evidence exists, it is clear that deals that are not designed to benefit the ultimate customer run into great difficulties. These deals appear to be driven by the goal of gaining quick impact on share price to benefit shareholders and the standing of company leadership. A case in point is Quaker Oats’ purchase of Snapple in 1994. Quaker shoved Snapple into its Gatorade distribution network, not respecting either’s uniqueness. Three years later, Quaker sold Snapple for US$ 300 million, taking a US$ 1.4 billion pre-tax charge.
The case of Planter’s provides an example of a post-merger integration where a brand was almost irreversibly damaged. After Kohlberg Kravis Roberts & Co. took RJR-Nabisco private, they sought efficiencies. Among other actions they merged the sales force of Nabisco Foods with that of Planters and Lifesavers, which had been distinct. The two very different brand cultures did not gel and neither side found success in selling the other’s products. As morale and sales plummeted, advertising and promotional support for Planter’s Nuts was cut. The Planters brand was gravely impacted. One analyst was quoted as saying, Planter’s “lost its reputation as the only premium brand in the industry.” Further, a sales representative quoted in the Wall Street Journal, said “Mr. Peanut disappeared.” Intangible assets often outweigh the tangible. Coca-Cola’s market capitalization of US$ 112.5 billion is 91 percent intangible assets. That adds up to US$ 102 billion tied up in the brand, strength of management, and patents. (Source: Interbrand’s World’s Most Valuable Brands study.)
The greatest flaw of many mergers and acquisitions is in not recognizing where the true value lies in the transaction. Perhaps shutting down branches and purging a percentage of the payroll should not be the prime focus. Investment in the brand must come first to ensure revenue enhancement. There are several critical activities to undertake when acquiring and merging brands.
That said; will the brand of The Brickman Group and ValleyCrest Companies, two industry greats, built on a legacy of it’s founders and thousands of employees be diminished with it’s name change to Brightview? Will clients of these companies individually unite and buy into Brightview’s ‘bright’ future ahead? While only time will tell, I remain, has this name change, started the building of a brand, or destroying two great company legacies? BTW- what is that new color scheme? STAY TUNED!
Your thoughts and opinions?
Looking for a good book on the subject, suggested reading;
- The Visionary Leader: How to inspire success from the top down.
- Susan Bagyura (Author), Michael E. Gerber (Foreword), Fiona Dempsey (Illustrator)