The natural bias in pre-merger due diligence is to focus on identifying the factors that might jeopardize the success of the merger – the deal breakers. Inadequate attention is generally given to the factors that may contribute to superior post-merger performance – the deal makers.
Rich Ettenson and I are actively doing analysis to test our hypothesis that corporate brand strategy is one of the variables that can significantly influence the success of a merger. Brand strategy plays a vital role in ensuring that customers, employees and investors understand the reasons for the merger, and the future benefits that it will deliver to them. This communication is important because it is the behavior of these three audiences that ultimately decides the success or failure of the merger.
So far, our work has resulted in:
- Categorization of the 10 corporate branding options available to managers
- Classification of over 1,000 mergers into these 10 categories
Now we are looking into whether there is evidence from the capital markets that any of the corporate brand strategies are associated with abnormal shareholder returns over the 12/24/36 months after the completion of the merger. It will be exciting to see if the market is fully efficient in recognizing in the degree to which certain forms of brand strategy facilitate a more effective post-merger integration process.
