All the talk of who 3G might purchase next, has brand managers around the world wondering if they are next. If you have ever gone through a merger, you will know that they suck. If you have not gone through one yet, you will likely find out soon how badly they suck. Not only do they suck for brands, they suck for brand managers. Most mergers however, seem to come out of nowhere. A little like a blockbuster trade in sports, they shock the system.
I bring a unique expertise to this merger topic, having survived three and half of them. One was so small and fast, I would call it half. I know people who have gone through 5 or 6 of them.
With each merger, the companies used a different ‘merger rule’: one went fast, one went slow and one went clumsy. Sadly, I used one ‘merger rule’ in that I was relatively a “jack ass” at various points of all 3 mergers. Apparently I have a ‘low EQ’. They say it takes 2 years for a merger to work. From my experience, it takes until the next merger to truly feel like ‘one team’. Some companies appear to go through mergers every few years. The poor people at Kraft have been traded around so many times, people’s resumes are starting to resemble a pop-up book more than a clean sheet of paper.
The data even suggests that mergers suck
M&A research studies estimate 83% of companies fail to reach their merger goals. With those statistics, you would expect companies would avoid all merger activity. The problem is cutting the check is much easier than the work it takes to make the actual merger work. The only winners appear to be the investment banks that finance the deals and the consultants who churn out very high-priced org charts.
I worked on one merger where the final purchase price was almost twice what we valued ourselves. We were happy until we realized our new bosses were paying too much and it would just mean future cuts to make the merger pay off. Ten years later, they are still cutting. I was shocked at the lack of pre-planning from those who bought us. They barely knew what we did. I remember one of our new owners said “we bought you because of your global breadth”. I did not have the heart to tell him the truth, in that we were not very global at all, but we were really just in 10 markets that were far apart from each other. Everyone after the merger talks about culture. They make tons of culture posters. But, it seems no one ever considers the cultural fit before the purchase.
No one ever says, “Congratulations, we want to add money to your brand.”
The brands do not benefit. With a distracted company sorting through the complexities of the merger and trying to make the numbers at all costs, brand advertising and risky innovations are the first cuts. Brand Leaders do not benefit. They have to re-work and re-work slides for new management. The discussions with the new bosses take a huge step back with brilliant questions like, “So tell me how this product works again?” or “Have we always done it that way?” With a need for synergies, the high-priced merger consultant just groups brands together in the new org charts. The brand leader feels lucky just to keep their job, even if their portfolio has doubled, for the same salary. Less attention is paid to each brand with the crucial attention to detail slipping. Brand budgets are scrutinized and cut, any risky or creative options are sacrificed while the safe and reliable choices are pushed forward.
The reasons why mergers fail is the same reason they had hope for success in the beginning. The #1 reason for mergers is the belief that ‘we can do a better job with the brand than you can’. The problem is the need for merger synergies gets in the way of the needed turnaround. The new owners do not know the details needed, so most of their ideas seem naïve and elementary. The needed investment gets put off until the merger is paid off. The brand continues to hemorrhage and the new owners do not seem emotionally invested in the brand’s success. The other main reason is an ego-driven excitement of “Imagine the power of us together”. I am sure that is going through the halls of Kraft-Heinz as they drooled over Unilever. Sure, there are synergies in manufacturing or at the retail stores. But, these huge mega-corporation usually just take two smart and nimble organizations and turn them into a slow, clumsy and risk-averse bureaucracy. A ‘new win’ in the mega-corporation feels like after 19 meetings, they have finally agreed to use your ‘expense form’. Yeah!
My advice to brands considering a merger: focus on growing your own brands, choose the smartest consumer driven strategies and then execute with intelligence and passion. Sounds like marketing 101? Yes it is. You should just stay focused on growing your own business instead of drooling over others.
The grass always looks greener on the other side of the fence, until you buy the brand and then slowly start to destroy it.
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