Brand Acquisitions

Real brands have real value…in fact recent studies confirm what many of us have known for quite some time, which is that brand equity can become one of the largest assets on a companies balance sheet and ultimately lead to increased valuations. While I have written often on the topic of branding in today’s post I’m going to look at brands (as opposed to companies) as potential acquisition targets…

Brands that have been well engineered have also been heavily invested in creating both tangible and intangible worth which makes them solid acquisition targets. It is much easier to acquire a brand than create one from scratch as you are leveraging the investments of time, money and efforts of the previous brand owner. Even if a brand is not particularly well known or even if it happens to be dormant there may still be significant logic to acquiring the brand. Moreover acquiring the right brand can give you immediate access to certain markets and demographic as well as pave the way for geographic expansion.

By decoupling a brand from the operating entity that owns it, your acquisition will likely be void of much of the brain damage typically associated with the post acquisition integration efforts of rolling-up a going concern (employees, infrastructure, etc.). By stripping the brand out as a stand alone asset you acquire the brand equity which will often include significant good will, mindshare, marketshare and any number of other benefits in a much less complicated transaction that can close in a short period of time. Lastly, many companies undervalue their brands (especially if they are not currently active) and will often times divest themselves of a brand at a discount over true market value. This is in stark contrast to a company’s perception of their own enterprise value which they almost always value at a steep premium.

While the text above discusses brand acquisition from the buy-side perspective the logic should not be lost upon potential sell-side players. Those companies that have developed brands (active, dormant or somewhere in between) looking to leverage their investment should look into a valuation of their brand assets (see “Assessing Brand Value“) and consider the possible divestiture of brands that don’t fit into the company’s operating strategy going forward and where it makes economic sense to do so…