How Brand Integration Is A Critical Success Factor In Mergers And Acquisitions

By Author: Asha Sampath
Total Articles: 3
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“Lenovo thought it knew how to fax tarnished Brands – Then it bought Motorola “. Success with IBM deal, led Chinese firm to underestimate difficulty of reviving the smart phone Company,’- ‘we didn’t know each other ‘- Quote, Unquote from a recent Article published in the Wall street Journal. What is different in the 2 deals that warrant a unique approach to ensure that the expected outcome is delivered quickly, efficiently and effectively? After all, every deal is unique and the challenges to success cannot be overshadowed by the aura of success from a previous deal.

What were the critical success factors to derive the expected synergy?

Talking of Lenovo-IBM deal- Lenovo have a great story to tell about how a PC maker that had built a strong market leadership in homeland China , went International through the IBM deal in 2005 . To quote the words of Mr. Yang, CEO of Lenovo when they acquired IBM, “it is the story of a snake swallowing an elephant”. In this case, when Lenovo bought the PC division of IBM, Lenovo would be riding high on the Iconic Brand value of the IBM ...
... ThinkPad and their advanced PC manufacturing technology .Although the PC division Of IBM was losing money heavily then against pricing policies of Dell and HP, the only reason for that situation was that the PC division was no longer a core business for IBM that had set out to focus on the more lucrative high end Server business and IT services. So, in this deal, Lenovo had a very clear vision on how it would leverage on the brand of IBM, their R&D resources, their global sales and distribution channels and also the operational teams to become the # 1 player in the PC business. Clearly they were on known track to achieve not just revenues but also internationalization objectives.

On the other hand, in Lenovo-Motorola mobility deal, the expected outcome for Lenovo from the deal was to become #3 Smartphone company, the most prominent competitor to Apple and Samsung. Lenovo was ranked “ 4th among top gigantic global Smartphone manufacturers” and had strong leadership in home market in China but Lenovo’s market share in US was Zero and were struggling to get into Europe and US markets . Motorola at the other end, were pioneers in Smartphone business and had forged multi-decade long and strong relationships in the US market. However, at the time when Lenovo acquired it, they had already lost Brand positioning and premium pricing in the recent years, given the skewed strategy of Google behind the acquisition of Motorola. Google’s acquisition objectives were rather patent protection as opposed to inorganic growth and so the Motorola Brand positioning had suffered a setback along the way. So, very different from the earlier deal, Brand revival would be the single most important challenge before the expected outcome from the deal could be achieved. One way of doing this would be to leverage on the stronger Lenovo Brand who by then had gained top positioning in the PC segment post the IBM deal.

What was the Marketing strategy followed:

In the IBM-Lenovo deal, Lenovo pursued a very articulate strategy whereby they would leverage on IBM’s global distribution system in the Enterprise PC segment. Alongside, Lenovo were also monetizing on its own Brand value as a Personal Computer brand which had drawn great recognition already in China and across Asia. The marketing strategy clearly in this case was defending well built US and Europe markets of the ThinkPad brand while at the same time further strengthening foothold and presence in China and other emerging markets by their own right and brand value.
In the Lenovo-Motorola deal however, a good point in analysis is the strategy behind Lenovo’s decision to reintroduce faded Motorola brand also in China, where the Lenovo phones were already having a great market and almost in #1 position. On the other hand, marketing budgets may have fallen short in order to sustain this strategy that led to the exodus of other competitive brands into China. This not just diluted the brand positioning for Lenovo but also did not yield desired acceptance for the Motorola Brand. On the other hand US marketing spend may have either fallen short or budgets were not channelized towards product improvement to revive the diluted Motorola Brand to a premium segment positioning and retain loyal customers. Well researched report for consumer insights could form the basis for a geo-product strategized marketing budget in order that spends is made at the right places. The objective would be to protect and defend even while generating new market.

What is the role of Brand Architecture and Brand Identity transition in deals?

How long do we retain existing Brands in order to protect existing brand equity and market share before transitioning to a cohesive Brand portfolio under the merged Brand? In the IBM – Lenovo deal, clearly the IBM Brand name was the underlying USP for the merger. In fact, as per terms of the agreement, Lenovo was allowed to use the IBM brand name for a period of 5 years before it transitioned into the Lenovo Brand identity. Lenovo used the 5 year buffer time to make the global users recognize the Lenovo Brand while protecting the existing market under the IBM Brand .So the Co branding strategy was very clear and articulate in this case.
However, in the case of Motorola deal, Lenovo decided to retain both brands. But, since the Brand positioning for Motorola had already suffered a setback, a point in thought would be if the Brand Identity strategy could have been any different from the earlier deal. Or at least could the transition roadmap have been better articulated and communicated well to customers in order that they can relate well to the expected synergies and assure them about SHV.

A deep understanding into the DNA of each other’s business will help articulate the compelling CVP and SHV synergy outcome expected from the deal. A careful research into the Synergies - Product portfolio, market segment, distribution network, Brand equity, cultural fit challenges and potential roadblocks going forward would help businesses more conscious of what challenges to expect in the process of integration and how to convert them to opportunities. While strategizing is one aspect, what is also equally if not more important is the implementation of the strategy in a scientific and customized way.