Ask @RetailPhil: What Happens When a Brand Gets Acquired?
Acquisitions happen for all sorts of reasons. It’s always advantageous for one company or brand to acquire another, but the reason why they acquire/get acquired is where it gets really interesting. When a brand buys another brand, there are lots of interesting facets – from how a company is financing the acquisition, and the friendliness of the acquisition, to what happens to the people involved in both organizations. While all of these things are definitely things for people in finance to keep an eye on, as a retail geek, it has me thinking about three key reasons why a brand might buy another brand.
The brand’s presence gets extended in consumer’s lives
The most basic reason for being acquired is because the brand fits into the acquirer’s portfolio, while helping them to expand into other categories. One great example of that is P&G selling Clairol and Covergirl to Coty. This allowed Coty to continue selling its fragrance-based business, while extending into categories that their consumer was already in the market to buy. As a result, Coty’s now much larger (and varied) consumer base allows the company to be significant in categories beyond fragrance. In this particular case, Coty has Revlon, Unilever and L’Oreal to compete with in many of these categories, so expanding their reach is a great idea.
Companies get to buy expertise…
Often, when a brand has figured out a way to color outside the lines, it’s in another company’s best interest to buy that intelligence as well as the people behind it, and benefit from that proprietary knowledge. We saw that this year with Walmart’s acquisition of Jet.com. Rather than learn the ropes the old fashioned way (and experience a longer lead time), Walmart simply acquired what they needed to know. Sometimes this expertise may manifest itself in the form of geographical know-how, meaning one brand will know a region or country better than the other, but don’t mistake this for buying distribution. Buying distribution is usually a bad investment – without the expertise, distribution is usually lost.
…while the brand accelerates in growth!
When one of our favorite brands, Nutcase Helmets, was acquired, founder and president, Michael Morrow, deemed it the fastest way to grow the brand. “Now is the perfect time for the next growth phase of the Nutcase brand,” he explained. “This merger will allow our product design, brand marketing, and sales organizations around the world to continue to innovate in the bicycle helmet market, with an emphasis on integrating creativity and technology to meet the safety needs and lifestyle aspirations of riders worldwide.”
As with every acquisition, there’s bound to be some feelings of instability. I would be remiss not to mention that, in the process of buying and selling brands, employees can indeed be affected by these purchases. Sometimes, this results in some people leaving to find new jobs or getting laid off and having to figure out their next steps.
We hope that in Nutcase Helmets’ case, the same amazing team we know and love will continue to work at Nutcase and help to grow the brand from a cool bike helmet to a lifestyle product!
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