I came across an interesting article last week from the Hindu News entitled: Brand-asset due diligence needed in acquisitions written by D Murali.

Do companies conduct brand-asset due diligence as part of their acquisition process? “Rarely,” says Mr F. Joseph LePla, co-author of ‘Brand Driven’ and ‘Integrated Branding’. He explains his company’s approach:

The heart of our due diligence model is based on the belief that to understand the real value of a transaction, you need to keep customers, employees, culture, practices and what customers value beyond products and services at the heart of your valuation and subsequent integration strategy.

A Watson Wyatt survey of 1,000 organizations from 1999 (Yoon S., October 11, 2001, ‘Career Review: Pay Attention to People,’ Far Eastern Economic Review) found that less than 33 per cent of companies attained their profit goals after an M&A (merger and acquisition), and that mergers failed to produce the expected benefits 64 per cent of the time.

Sandy and I had the opportunity this summer to discuss the merger of KLM and Air France with Emmanuel Jahan, HR Permanent representative for European Institutions. When these two companies merged in 2004, Air France had 80,000 employees and KLM had 30,000. The good news is that both were in growth and had recently restructured. They had complementary operational networks and destinations. Therefore employment was not as crucial and issue as in many mergers. In addition commitments were made to preserve employment (not posts).

It was and is believed by the senior transition team that cultural differences are more easily accepted through a step-by-step approach. This meant the ability to communicate with one another and so English was adopted as the common language. This challenge was not only in providing the English training classes but also how to overcome the psychological block. Thinking longer term, there was also a recognition that future geographical mobility would be facilitated by a common language.

Another important factor was how this union would be viewed by customers who had strong brand loyalties to each airline. One of the guiding principles of the transition team was to be sure that this merger was a positive response to the consumer’s request for innovative and quality products. Brand-asset was and remains a key consideration.

The two years of maintaining the separate entities has past and it will be interesting to see how things transpire now that the unions have more to loose. So far the strategy has worked as employees remain engaged and we have no reason to believe that it won’t continue. However, the pressures will also increase as the company faces the issue of trying to create a new identity and integrate a new shared vision throughout the organization.

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