Don’t Ignore Brand During the Banking M&A Riptide
The next M&A banking wave may be upon us. What can be learned from past integrations where brand was left in a suboptimal place?
While there is no crystal ball, slow economic growth and an inverted yield curve continue as headwinds for the banking industry. Both have already exposed vulnerabilities of large regional banks like Silicon Valley and Signature Bank, as well as G-SIBs such as UBS and Credit Suisse. While the speculated wave of consolidation may be overblown, there will no doubt be M&A activity during the foreseeable, uncertain future.
HBR continues to cite that between 70-90% of acquisitions fail. In addition, MIT Sloan studied 200+ M&As with values exceeding $250M during a 10+ year period starting in 1995 and learned that in nearly two-thirds of those deals, brand strategy was deemed to have a low to moderate influence in pre-merger discussions. This approach leads to the new identity or identities post-merger in a suboptimal place with limited clarity and often stems from a gap in brand expertise during the M&A process and following.
Specifically, we see five common mistakes related to brand that hinders speculated growth performance and increase costs during and post-acquisition:
- The deal strategy undervalues customer upside and risks: To complete a fully informed financial forecast, due diligence must quantify current and future demand, change tolerance and emerging customer requirements.
- There is limited understanding of purchased brand assets: For a truly shared optimized portfolio post M&A, companies must understand how all brand assets work to drive choice, revenue, and pricing power.
- Integration teams have a narrow framing as primarily a “re-branding” effort: M&A presents a rare, point-in-time opportunity to articulate a new corporate narrative, upgrade customer perceptions and drive lasting cultural change within the organization.
- Integration planning without a go-to-market plan to win: Integration priorities should pair synergy plans with growth moves: product, service and experience innovation to drive growth through the new asset base.
- The new enterprise under-leverages culture and employee engagement: Successfully informing, engaging and enabling employees BEFORE launching externally is critical to retaining human capital and driving cultural engagement.
As inevitable market forces drive sustained or increased M&A in the banking industry, new and exciting opportunities emerge. Here are three practical things to consider that relate to your brand (and business) during M&A:
- Consider customer context early and often: Ensure all functional discussions include conversations around customer impact and set a precedent that addressing the customer impact and experience is a priority. This is especially true at retail banks, often built around specialized customer focuses or geographic footprints with entrenched identities.
- Evaluate the value and values of brand assets to guide the right transition plan: Typically, fewer stronger brands win out in banking. While long-term efficiencies exist for consolidating brands, careful work must be done to explore different end-states and migration scenarios. Perform the right evaluation ahead not just to understand the brand’s value, but also the inherent values the brand holds, and the customer perception to guide the right transition plan in context.
- Discover or rediscover purpose and power it through culture from within: Banking consolidation done wrong can feel like a mismatched transformer coming together with messy operating model discussions and integration cadences that unfold over time. This can be especially distancing for distributed employees working in branches or regional offices closest to the customer. Investing early in the process to better understand and sharpen a combined new culture with a more meaningful purpose can serve as a North Star for smoother and more engaged integration.
Despite certain leading indicators, it will be hard to predict exactly what will happen with M&A in the banking sector. However, we can learn from the past in some capacity through the diligence and integration process to better predict the future, learning about the importance of brand as a critical consideration in the process.
For more information on capturing greater brand and marketing value through M&A, please contact us today.