How Brand Equity Audits Empower Strategic Acquisitions 

Acquiring a new business is a significant investment that requires careful consideration and planning. One critical yet often overlooked aspect of an acquisition is the brand equity of the target company. A brand equity audit is a comprehensive evaluation of a company’s brand assets and liabilities, including its reputation, customer perception, and market position. Conducting a brand equity audit during an acquisition can provide valuable insights that help buyers make informed decisions and avoid costly mistakes.

We’ve already dug into the importance and framework for brand acquisitions, as well as the strategy for multi-brand existence. Now, it’s time to look at the downfalls of failing to complete a comprehensive audit, which can include overpaying for the target company, underestimating the cost of rebranding, damaging your own brand, and losing customers. These risks highlight the importance of evaluating the brand equity of your target company, and the role it plays in ensuring the success of your acquisition.

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The Risks Involved in Overlooking Brand Equity Evaluation During an Acquisition: 

1. Overestimating brand value: Without a proper brand equity audit, the acquirer may overestimate the brand’s value, which can result in paying more than the actual worth of the brand.
2. Difficulty differentiating the company from competitors: If the buying firm is not aware of the brand’s differentiators, it may struggle to set itself apart from competitors. This can lead to difficulty attracting and retaining an audience, especially after an acquisition. 
3. Inability to leverage brand assets: Without complete knowledge of the target brand’s assets, including its customer base, goodwill, and intellectual property, the acquirer may miss opportunities to fully leverage those assets.
4. Financial underperformance: If a buying firm acquires a company with weak brand equity, the company may struggle to generate revenue and require additional brand building or a secondary strategy to absorb the brand into an existing identity within the portfolio.
5. Missed opportunities: Without a brand equity audit, the acquirer may miss opportunities to create synergies between the acquired brand and its existing portfolio of brands, resulting in lost potential revenue and growth.
6. Difficulty in integrating the brand: The acquirer may face difficulties in integrating the brand into its existing operations, culture, and marketing strategies without a proper understanding of the brand’s equity.
7. Difficulty securing financing: If the target brand has weak brand equity, it may be more difficult to secure financing, as lenders/investors may view the company as a higher risk.
8. Difficulty expanding or growing the business: Strong brands beget strong growth. And understanding a brand’s strengths is the key to brand communications/marketing strategy. That being said, if the target brand has weak equity, it may be difficult for the company to expand or grow the business, due to the struggle to attract partners or investors.
9. Difficulty with future exits or acquisitions: When a private equity firm or business acquires a company with weak brand equity, it may be more difficult to exit the investment or to sell the company in the future, as it may not be as attractive to potential acquirers.
10. Difficulty building reputation and trust with stakeholders: If the buying firm is unaware of issues within the brand’s reputation or market capabilities, it may be more difficult to build a reputation of strength and trust with stakeholders, including employees, customers, and suppliers.

In summary, not auditing brand equity before making an acquisition can result in financial underperformance and a lack of strategic options for the company and the private equity firm, making it harder to achieve a successful outcome.

Team Huebner is Here to Help

Huebner Marketing helps private equity firms and companies looking at acquisition as a method of growth to measure and optimize the value of a target brand. Our proven method of comprehensive analysis helps our clients determine the strengths, reputation, potential performance, and potential pitfalls of a target brand. A key component of the due diligence process, our Brand Equity Audits illuminate key equity indicators such as brand awareness, customer perception, brand associations, and brand loyalty. Once the audit is complete, we provide actionable insights and recommendations to help companies determine and strategize their next moves, ensuring that the acquisition is aligned with business goals.