The Enterprise Transformation Catalyzer

Brand Equity in Acquisition Strategy

Navigating the Challenges and Complexities

In the competitive business world, acquiring an established brand can seem like a shortcut to gaining market share. After all, buying an established brand means acquiring its loyal customer base and the market share that comes with it. But is it really that simple? The answer is not as simple as one might think. Consider the case of the Tata Group. The conglomerate borrowed nearly $18 billion to acquire a number of foreign brands, including Land Rover, Jaguar, Daewoo, and Tetley, in an effort to strengthen its asset portfolio. However, the new purchases did not generate enough revenue to pay back the loans, leaving the company in deep financial trouble.

Acquiring a brand is no guarantee of success. Truly valuable and profitable brands are the result of a long-term investment in branding. Therefore, it may be prudent for companies to evaluate the financial investment required to revitalize and successfully manage established but loss-making foreign brands before committing large amounts of borrowed cash to their acquisition.

This underscores the importance of brand equity – the value a brand adds to a company beyond its physical assets. A strong brand can differentiate a company from its competitors, create customer loyalty, and contribute to long-term success. When acquiring a brand, it is critical to consider its existing equity and how it fits into the acquiring company’s overall brand strategy. 

What does brand equity include?

What if we see brands as game changers for the world and society, then Brand Positioning is the idea and action they commit to bring to life for the world and society.

What is the effective strategy to manage and enhance brand equity?

The effective strategy to manage and enhance brand equity involves investing in branding and marketing efforts that create customer loyalty, differentiate the company from its competitors, and establish the brand’s reputation and associations in the market. Companies should also ensure consistency in their branding across all touch-points and continuously monitor and measure the effectiveness of their branding efforts.

What particular brand equity should companies at the M&A stage should take care of?

Companies at the M&A stage should evaluate the existing brand equity of the acquired brand and consider how it fits into their overall brand strategy. They should also assess the potential financial investment required to revitalize and manage the brand to ensure it adds value to the company beyond its physical assets. Additionally, companies should consider how the acquired brand’s associations and reputation align with their own brand values and ensure consistency in their branding efforts across all touch-points.

In summary, while buying an established brand may seem like a straightforward way to gain market share, the reality is much more complex. Companies must carefully evaluate the long-term benefits and costs of such an acquisition, including the existing brand equity and how it fits into the overall brand strategy. Building brand equity through strategic brand investments is a more reliable and sustainable way to create a profitable and valuable brand.

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