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Banks, brands, mergers and acquisitions

Recent McKinsey research observes that while "intangible assets make up most of the value of M&A deals...brands account for a considerable portion of these assets."

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In the wake of recent M&A activity in the commercial banking arena, Joseph Benson and Jack Foley ask if merging commercial banks should care about brand.

There is a throwaway line in the film American Psycho. The movie's demented central character, Wall Street executive-turned-serial killer Patrick Bateman, is describing what he does.

"I'm into murders and executions", he says without pause. The other character seems to hear "mergers and acquisitions" and isn't privy to his Freudian slip.

Set in the rah-rah Eighties, American Psycho satirises a time when mergers and acquisitions made daily business headlines and were perceived as somewhat mysterious and underhanded.

Today, M&A activity is hot again, with billion dollar deals instantly altering the competitive landscape of multiple industries--think P&G and Gillette, AT&T and Cingular, Manulife and John Hancock.

Despite Hollywood's darker musings, today's mergers and acquisitions are neither mysterious, nor about murder and executions. Rather, they are about creating shareholder value, competitive advantage and synergy, and are closely followed by millions of investors and analysts, media and customers worldwide.

Brand often plays a central role in creating this value. As recent McKinsey & Company research observes, while "intangible assets make up most of the value of M&A deals...brands account for a considerable portion of these assets."

There may be no better example of this recent frantic M&A activity than in the commercial banking arena.
But should merging commercial banks care about brand?

Brand matters to merging banks

Not since 1998 has the banking industry experienced the pace of consolidation taking place across the country today.  From national mega-deals to local ones, it seems as if every bank is in the Great Game, either as a buyer, a seller or an interested flirt.

Despite the hundreds and hundreds of billions of dollars being invested in this M&A activity, the word "commodity" continues to be readily associated with banking, as if by way of explaining why it is so difficult for banks to differentiate themselves from competitors. Certainly, the products and services themselves may be so similar from one bank to another to be considered commodities, but there is one thing that can never be commoditised--a bank's brand. Brand is what ultimately defends banking from the doom of commoditisation. 

When banks merge, their brands must reconcile. More often than not, one brand is going to be nurtured and one brand is going to be retired.

Yet, too often in bank mergers, brand is relegated to post-merger consideration among the cacophony of pre-merger financial, operational, legal, personnel, and technology activities.

Brand is not everything about a bank--it is only about what makes that bank different.

Brand is what creates differentiation and preference in customers' hearts and minds. It is why they choose to do business with one bank and not the bank across the street. Again, brand is what ultimately defends banking from the doom of commoditisation.

When research already indicates that between 50% and 80% of mergers fail to deliver the expected positive results, brand (and customers) should not be left to post-merger discussion.

Brand strategies for merging banks

The goal of a bank merger is to increase the bank's value in one way or another.

So, too, the objective of a bank's M&A brand strategy should be to increase its brand equity.

One way the acquiring bank achieves this is by persuading its customers--both its existing customers and those it may be acquiring in a merger or acquisition--that the bank is worthy of their continued emotional investment once the merger or acquisition is complete.

There are four principal brand strategies for merging bank brands. Each strategy has inherent advantages.

Black Hole: In the Black Hole strategy, one brand survives--usually the brand of the acquiring bank--and one brand is rapidly retired, completely disappearing as if into a black hole. A recent example of this strategy is Bank of America's acquisition of Fleet Bank.

Harvest: In the Harvest strategy, the equity in one brand is extracted over time until that brand is an empty shell.  No brand building efforts or marketing resources are budgeted for the harvested brand.  Instead, it atrophies over time. In theory, all of the positive characteristics and attributes of the harvested brand have been escorted to the surviving brand and customers are given the time to transfer their loyalty. As a result, the surviving brand should command a price premium.   

Marriage: In the Marriage strategy, the "marrying" brands seek to create meaningful and relevant differentiation in the minds of the customers of both brands. A very recent example of this strategy is Toronto-Dominion Bank and Banknorth, now TD Banknorth. On a multinational scale, think JPMorgan/Chase.

New Beginnings: In the New Beginnings strategy, merging banks decide that neither of their brands carries tremendous equity and so they build a new brand. This is much more advantageous for small banks without wide brand awareness or brand equity. Moreover, when more than two small banks merge at one time, this strategy is often the most effective way to begin building brand equity. NewAlliance Bank in Connecticut is a fine example of this strategy.

When To Choose A Strategy

Banks should decide on a potential brand strategy during the due diligence process of a merger or acquisition. Bank executives--particularly the president and CEO--must fulfill the role of brand stewards in compelling the bank to evaluate the equity of both its brand and the brand it intends to acquire.

Defining which brand strategy is the most appropriate can be determined by conducting qualitative research within discrete key stakeholder groups. These key stakeholders include existing customers, bank leaders, and shareholders of the buy-side bank.

And The Beat Goes On

As this article was going to press, there were two reports in leading media outlets ( and breathlessly discussing the potential mega-mergers in industries as diverse as retail and energy.

Two words never mentioned--not once--in either analysis: "customer" and "brand".

One can only hope that these companies are not forgetting about their customers or their customers' emotional investment in their brand as they consider a merger.

If they are forgetting, maybe Patrick Bateman's slip of the tongue in American Psycho will be apropos. Except in this instance, it won't be Patrick doing the murdering --it will be these companies' soon-to-be former customers.

About the authors

Joseph Benson is a brand strategist with over 25 years of experience designing and implementing brand and marketing strategies for financial services, healthcare, high technology, entertainment and retail clients. Currently, he is defining brands for the Enterprise Bank & Trust Company, Nicholls State University, Apollo Housing Capital, Providence College, LPL Financial, Westfield Bank, Montclair State University, St. Francis Hospital, Suffolk University, The Rhythm of Business and The City College of New York. Joseph also has a personal brand strategy practice.  Clients include photographers, medical professionals, entrepreneurs and artists. Most recently, he was the vice president of brand strategy at Sapient Corporation, growing and managing a global brand strategy practice. During his tenure, he worked on over 50 brand engagements. Clients included Chase/JP Morgan, Staples, Morningstar, The American Cancer Society, Lucent Technologies, Schroders, L.L. Bean, Bain, Verizon, Avon, Disney and Nickelodeon. His articles on brand strategy have been published in North America, Europe, Turkey, India, South Africa, New Zealand and Asia.  

Jack Foley ( is a brand strategist with a broad array of life experiences that inform his relationships with clients and their brands. As the intelligence officer for the US Army's experimental Task Force XXI combat unit, Jack briefed members of the president's cabinet on modern tactical intelligence issues. After leaving the military, Jack served as director of global operations at Sapient Corporation, a former S&P 500 consultancy, where over a period of 30 months, he oversaw the expansion of Sapient's global footprint from 700 people in 5 offices to 3,000 people in 15 offices. While at Sapient, Jack worked with financial services clients that included Goldman Sachs, Janus and Chase. Most recently, Jack was vice president of marketing for one of the oldest brand firms in the United States. Jack has a Bachelors of Science in Accounting from Boston College.

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