Why good names mean a good deal

Against the background of agreeing valuations, harmonising management structures, squaring the regulators and sugaring the pill of job losses, the subject of corporate identity might seem the last of anybody's concerns when it comes to mergers and acquisitions.

But if identity is important at all then surely it should be important at this moment in a company's existence. Can a prominent corporate identity protect a company against a predator? And if a company is on the acquisition trail, will a strong identity help?

"Corporate identity is important prior to a merger, but it's not something you can just switch on when a hostile bid is made, as you can with communications," says Clare Fuller, director of consultancy at Bamber Forsyth, an identity management firm. But many companies fail to consider the constructive role that a coherent identity can play during such processes, says Wally Olins of Wolff Olins, a corporate identity consultancy. "For them, it only comes up when they start to think of names," he says.

Names are the most obvious expressions of identity. When A merges with B, there are several possibilities. The company might become A only, B only, A plus B, or C. When Ciba-Geigy and Sandoz announced a corporate merger plan, it also announced a name for the product of the pounds 40bn deal - Novartis. "It does help draw a line and start again," says Mr Olins.

But increasingly, this is the less trodden road. "Just trying to find a name you can register in one business sector around the world is a problem," says Aziz Cami of Partners, a design and identity consultancy. "That's driving less distinctive identities now." The willingness to live with uncomfortable combinations such as SmithKline Beecham, Glaxo Wellcome, BSkyB and Lloyds TSB shows the difficulty of finding an ideal new name. In the case of the surprise merger of Royal Insurance and Sun Alliance, the adopted combination, Royal Sun Alliance, is more felicitous. The name, pending Home Office approval for the new use of the "Royal", is the one certain facet of the new company's identity.

Both companies have relatively strong brands, thanks in part to recent poster and television advertising campaigns. "Corporate identity has to do a broad job with insurance companies because they are selling intangible things and they have names which don't mean very much," says Philip Mann, principal of Bamber Forsyth, which streamlined the appearance of Sun Alliance literature in 1995.

Strong brands present difficulties in the aftermath of a merger. Both companies have many brands, each of which has its own market and following. In Australia, for example, the two insurers have worked in tandem for two years under the name Sun Alliance & Royal.

"When competing organisations come together, one has to take into account that there are positive and negative loyalties," observes Steve Crowther, the managing director of Holmes & Marchant Communications, the design company that updated Royal's identity in 1995.

The most important thing is not to embark upon a hasty "rationalisation" of the brand properties. "We would not wish to close off any possibility at this stage," says Martin Booth, group marketing services manager at Sun Alliance. When the two Pearson-owned educational publishers, Addison- Wesley and Longman, came together, people were already referring to the merged company as Addison-Wesley Longman by the time Bamber Forsyth was involved, providing one good reason to unite the names. But there was a better reason, too. "It sounds crude, but it shows what actually happened, and it was crucial to signal that to the marketplace," says Ms Fuller.

Bamber Forsyth created a new corporate identity for Addison-Wesley Longman and provided reinforcement for the Longman and Addison-Wesley names to be used separately as brands.

Lloyds and TSB presented a similar case of two strong brands. "The tradition in banks has been for the predator to obliterate the prey brand," said Mr Olins. "Here though, there is the option of keeping two names as brands since they do have different personalities." Likewise, if IBM were to acquire Apple Computer it would almost certainly retain the latter's identity as a brand.

Corporate branding is also important where the union is between unequal partners. A strong identity can make a small company more attractive to a predator by providing it with a valuable brand. "In some cases, people become targets because of their very high-profile identity and culture," says Mr Cami.

Forte is an example of a company whose revamped identity fortuitously left it well prepared for its takeover by Granada. "Forte made their business look more attractive to potential investors," notes Ms Fuller. "Forte is a serious brand the way Trusthouse Forte never was, and this must have influenced Granada."