How companies can avoid M&A failures like the "revolutionary" Time Warner-AOL merger

 
Kirsten Foster
Time Warner To End Deal With AOL, Spinning It Off Into Separate Company
The “revolutionary” merger of media giant Time Warner with AOL in 2001 was judged to be unsuccessful (Source: Getty)

Last year was the biggest ever for mergers and acquisitions (M&A), with AB Inbev’s ‘MegaBrew’ deal with SABMiller and Pfizer Inc’s merger with Allergan PLC among the deals. The announcement last month of the IHS/Markit merger shows us that 2016 has the potential to be another landmark year for M&A announcements.

At Landor we have spent decades creating brands for businesses that split, spin-off or want to accelerate parts of their business through separate brands, and we’ve learnt that the required strategic considerations are significantly different when building these kind of ‘break-away’ brands.

A typical rebrand is based on the credibility of the existing business, whereas break-away brands must focus on their independence and of owning a focused business space.

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One of the most classic pitfalls that is so often overlooked in M&A is not engaging the work force. Whatever you take away from them, in terms of brand, name, identity, you have to replace with something better and more exciting. The brand in an M&A, especially in a B2B environment, so often is predominantly about connect to employees.

But how do you create a brand and name that will stand the test of time? Firstly, do not create a brand that reflects your business today. Create a brand and name that represents the future, that stretches you, that makes people take notice.

Secondly, do not go into an area where you feel comfortable, as this is a clear sign you are creating something that already has a sell by date. Push yourself to create the future.

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During many mergers and acquisitions it’s important that the brand story integrates the two company cultures. The new brand needs to move onto a higher ground of story; it needs to find a common purpose.

There are a number of success stories where companies have listened to this, such as the merger of certification giants DNV and GL to form DNV GL – both companies had a strong heritage, centred on maritime origins. We focused on the new company, the new story and what the combined company can do that nobody else can, creating the story of 'A Broader View'.

In contrast, there have also been many M&A deals that have been less successful, such as the “revolutionary” merger of media giant Time Warner with AOL in 2001 – dubbed the worst corporate merger in M&A history.

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That year was the height of the internet craze, and the merger was supposedly going to bring the world of print and electronics together. However, the dot-com bust, and the decline of dial-up internet access (which AOL refused to give up) spelled disaster for the new company. The synergy of these two dynamically different companies never occurred. Since merging, Time Warner’s stock dropped 80 per cent, and after eight years the two companies eventually split.

AOL and Time Warner aren’t the only companies to overlook the importance of creating a new brand, name and identity, and they certainly won’t be the last.

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