From Opponents to Teammates: How Internal Competition Can Derail Brand Mergers

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From the Amazon and Whole Foods deal to Dell and EMC to Sports Direct and Agent Provocateur, the path to successfully merging two brands is generally paved with good intentions. However, sometimes good intentions aren’t enough to save a merger from internal strife. One of the greatest, most overlooked barriers to any potential M&A can be difficult to put into words and even harder to overcome. That’s because of its insidious nature, turning competitive employee attitudes that were once a business benefit into a serious liability.

When companies merge, there can still remain an underlying layer of competition and aggression between the parties involved – especially if they’ve previously conducted business in the same space. At Brand Union, we have seen first hand the challenges that come from differences in culture, both positive and negative, and have devised the actions to help those brand cultures align. In doing so, we’ve realized that to combat competition takes a clear, structured analysis of business culture and leadership, building mutual respect between parties and carefully assessing each brand’s strengths and values in terms of compatibility (or lack thereof).

Lessons Learned

The business world is filled with stories of brands that failed to resolve the competitive misalignment of their cultures. When Coca-Cola acquired Innocent, creator of Innocent Drinks, most agreed it was never going to work. Innocent had built a multi-million pound business with a brand rooted in healthy ingredients and having a social purpose and standards that were very much in touch with the culture of the organization. Its inclusive culture and flat organizational structure were key drivers of the brand’s success.

The business world is filled with stories of brands that failed to resolve the competitive misalignment of their cultures.

Then, Coca-Cola killed it. Innocent products lost 95% of their profitability in year one because a significant number of the employees didn’t want to be part of the organization. They felt that Coca-Cola was a mammoth entity, turning them into a tiny cog in a massive machine. There was internal competition over the heart of the brand that only resolved itself when Innocent was allowed to stay true to its cultural roots, and thus bringing it back from the brink.

Coca-Cola would have been wise to follow the example set by Indian industrial conglomerate Tata Group following its acquisition of Jaguar Land Rover. Tata acknowledged the strength of the British heritage brand and let it conduct business as usual, with the benefit of some substantial financial backing.

And now, out of the blue, e-commerce giant Amazon has bought into hundreds of physical stores through its acquisition of specialist grocery retailer Whole Foods and has already slashed prices. Is this move likely to be a marriage made in heaven or an aggressive move by a goliath to learn the tricks of the bricks and mortar retail grocery trade to take into the online world?  Will Amazon build on the culture established by the passionate employees of Whole Foods and their love of fresh, healthy foods or more likely impose their own culture of relentless, hypercompetitive and unforgiving pursuit of market share and sector dominance? Will this be another Coke/Innocent story or an acceptance that a new culture can be born through mutual respect and learning – only time will tell.

Changing Attitudes

If we know that competition drives a wedge between merging companies, how can potential conflicts be preemptively resolved? The answer lies, in part, in engaging middle management. The issue around merging managements, especially at the middle level, is that quite often this is where two companies will have the greatest number of redundancies.  At the top, senior management  is typically given slightly different areas of responsibility, whereas in middle management, responsibilities either significantly overlap or are identical. This creates an environment which breeds fear and finds managers from each side of the merger immediately engaged in a rivalry, causing cultural integration to fail.

Competitive attitudes are best worked out when upper management acknowledges cultural differences from the outset and shares a detailed plan for resolution.

Of course, the truth is that much of this initial anxiety is unavoidable as part of the financial savings in any M&A situation are found in downsizing, and middle management tends to be a target. But still, engaging with management is essential, as they are the catalyst for garnering employee engagement with the company’s new direction. These managers also play a major role in retaining the talent whom they feel are be aligned with the new company vision driven by the merger. They need to become part of the assessment process and nurture a sense of camaraderie.

It all comes down to managing competitive attitudes and directing them in positive ways. Competitiveness within a brand isn’t inherently bad. If employees are competitive and respect each other as a result of that competitiveness, that’s actually a good thing. If you are on the football pitch, you shake hands with your opponents at the end of the game, tell them that they played well and perhaps share a pint together at a nearby pub.

Making It Work

With any merger or acquisition, competitive attitudes are best worked out when upper management acknowledges cultural differences from the outset and shares a detailed plan for resolution. This process of reflection also gives companies a chance to communicate how they want to position themselves as a united organization with a new vision and new brand positioning. In the end, a good look in the mirror can help newly integrated employees understand the company’s new direction and create excitement around the journey of growth.

Competition and aggressiveness may be a basic reality of M&A, but they can be easily tackled with purpose and sensitivity.  Both companies must acknowledge and accept the fact that while the previously independent cultures are not the same, they must ultimately get on with the business of working together to maximize revenue and ensure sustainable growth for the new brand.

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