High-profile case studies have shown that the approach taken to corporate acquisitions and decisions as to how the two businesses are integrated following completion of a transaction can negatively impact brand loyalty and customer perception. However, there are practical steps that boards and management can take to mitigate such risks.
Often, the rationale for the acquisition of a company is driven by financial analysis and the perceived benefit to the bottom line of the enlarged group. This approach overlooks the need for early integration planning and consideration of the internal and external human factors that make up a corporate acquisition to preserve brand value, customer engagement and sales activity.
Deal teams should prepare not only an execution plan but also for the challenge of combining two organisations with different customer bases, products and services, cultures, human resources structures and operations and processes.
Protecting brand value - Informed decision-making
A key strategic question at the outset of an acquisition is whether to retain independent brands, use an existing one, or create a new brand. The strengths, weaknesses, and perceptions of each brand involved in the transaction should be identified through market research as well as the strategic direction for brand integration.
Case study – Maintaining brand autonomy
In 2016, LinkedIn was bought by Microsoft for US$26.2bn. The acquisition was aimed at combining Microsoft's productivity tools and cloud services with LinkedIn's professional network. Key to the transaction was the preservation of LinkedIn's brand autonomy in the professional networking space while at the same time integrating the two business operationally. LinkedIn continued to face the market as an independent entity, maintaining its visual identity, website, and user experience.
The acquisition brought together employees from both companies, requiring careful human resources management to ensure a smooth transition and retain key talent. Microsoft prioritised the professional development of LinkedIn employees, seeking to leverage their expertise and maximise their contribution to the broader Microsoft ecosystem.
Case study – Brand integration
The alternative to maintaining the brand autonomy of a target business is to combine two (or more) brands. In 2022, UOB acquired Citigroup's consumer banking businesses in ASEAN for US$5bn. A key driver for the transaction was the opportunity presented by the brand synergy with both banks having similar values. UOB were committed to a seamless migration experience for Citigroup's customers with expanded touchpoints and increased choice of partner networks to provide a wider range of products, services and benefits to the enlarged customer base.
The acquisition created 45 strategic and co-branded partnerships across multiple markets resulting in cross-border billings for UOB credit card offerings increasing threefold year-on-year and significantly elevating UOB's position in the consumer cards space in Southeast Asia. UOB's co-branding with Taylor Swift led to a 35% spending surge in Singapore using UOB’s payment infrastructure when 'The Eras Tour' concerts took place there in March this year.
Maintaining customer loyalty and sales
Customer base strategy and product and service alignment
An analysis of target customers and market segments post-transaction should form part of the integration plan to understand the impact of the transaction on the retention of high-quality customers and future marketing strategies. There may be changes in target consumers' age demographics, geographical location, preferences, and pain points requiring the alignment of products and services with customer profiles to mitigate the loss of customers. Tools available to marketing teams include offering vouchers and discounts to incentivise customers to provide email feedback or participate in focus groups to identify gaps from a customer perspective requiring action, for example, a refresh of customer loyalty programmes.
Effective communication strategies
Effective communication with a unified message via appropriate channels with internal and external stakeholders is vital. CEOs should be highlighting how the M&A transaction will benefit consumers. In the UOB example, the corporate messaging highlighted that the acquisition meant more and better product offerings for customers. Customers should be assured of continued service and quality, addressing their concerns and emphasising the benefits of integration. If customers are unsure, they will simply walk away, leading to lower sales volumes.
Internally, it was important to establish clear communication channels and an open-door policy within the organisation. Failure to communicate consistently causes uncertainty amongst employees and consumers. If staff are feeling unsettled or worried about job security, then this can cause a drop in customer service levels.
If the decision is to keep both brands independent, establish clear guidelines for preserving each brand's autonomy. This may involve maintaining separate marketing strategies, visual identities, and customer communication channels. If the decision is to integrate the brands, be transparent about the timeline and process involved. Address any potential disruptions or changes to product offerings or services that customers might experience to maximise customer retention.
While transaction execution will always remain a key focus, careful integration planning including consideration of the human factors of the deal is vital too, especially in the context of protecting brand value and customer loyalty.
