Friday, February 22

The Funny Thing About Mergers

We've seen a couple very high profile, large scale mergers get announced in the last week or so.

American Airlines and USAir.  Office Max and Office Depot.

Now generally, mergers make a lot of sense.  Two companies, two brands if you will, come together to form something bigger and better than they were when apart.  They combine assets and complimentary skills to create a new total that is greater than the sum of their parts.  The synergy between the two brands make for a greater impact in the marketplace.  Two strong brands come together to make an even stronger one.  You probably get the point!

The funny thing about the mergers announced this week is that this impact is not readily apparent ... certainly not on the surface.

Does anyone really know the difference between Office Max and Office Depot?  Do you realize that they are distinct brands that come from different companies?  Does anyone really know the difference between American Airlines and USAir?  Are those two airline brands really all that different?

Now admittedly, I am sure that there are synergies to be had financially and operationally - or maybe even in market coverage and purchasing leverage. I am sure there's a reason why the mergers make sense, if not only to protect their shareholder assets in tough categories within a tough economy.

But from a consumer and brand perspective, the benefit is not readily apparent.  That's the funny thing about mergers sometimes, they can have nothing to do with consumer branding and I believe that's a lost opportunity.  The brands together should make for a better consumer proposition, a better consumer experience.  It will be interesting to see if that's the case over time for these two mergers.  In the meantime, best of luck to them both.

What's your experience?  Jim.

Jim Joseph
President, Cohn & Wolfe NA
Author, The Experience Effect series
Marketing Professor, NYU

PS - Join us Sunday night at 6:00pm EST for live tweeting during The Academy Awards at #OscarExp.  We'll be talking marketing, movies, makeup!

4 comments:

  1. Interesting Jim, that I completely buy your premise (these two brands are undifferentiated in the market) and take it in the opposite direction: since they are undifferentiated, the smart brand move could be to collapse them into one position since that's effectively where they are in the market already. You get the costs out, get out of some redundant real estate, and consolidate the market. Now obviously, that's the argument for many brand consolidations that don't work! I'm hard pressed to think of incredibly strong brands that merge. Strong brands acquire, weaker brands merge . . . is that safe to say?

    Of course this suggests writing a blog post on having lived through one of these (a merger of equals) and how it relates to a micro-econ lesson from college about why brands wind up where they do.

    You always inspire me, Jim!

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  2. You're so kind, Mike. I'm thinking mergers like Disney and abc where there was a very visible benefit - and hopefully the consumer wins with better content and easier access. But there are certainly operational efficiencies that motivate many an acquisition/merger. See you at #OscarExp I hope! Jim.

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  3. As always, all great points. While not seen visibly, a fan of OfficeMax does benefit to a degree from a potentially healthier company coming out of the merger as a result of the efficiencies. Also, while not apparent on the surface, I think you missed blending of two cultures if the merger is done well.

    I was on a horribly delayed flight recently. The delay was due to mechanical problems so it was out of United's control. Although very frustrating, I appreciated the frequent text messages updating me on what was happening. But the big surprise was the well written email after the flight apologizing for the experience with a link directing me to a site where I could choose a gift as a small token of appreciation for the delay and for flying with United.

    I may be wrong but that type of customer service and expression of appreciation would never have come from the "old" United prior to the merger with Continental. It was Continental customer service at its best.

    When I was at Coty, we worked hard to blend the best qualities of the two cultures after an acquisition. A great example is Sally Hansen. An already big leading brand has grown significantly better since becoming part of the Coty family. Although not "seen" visibly by fans of Sally, they have benefited enormously by the rate of innovation and speed to market since the acquisition/merger.

    Have a nice weekend Jim!

    Mike Ferrara

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  4. So true, Mike ... a well run company with happy employees will surely enhance the consumer's experience. Love it! JIM.

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