If your company is planning a divestiture soon, you’re in good company. According to a 2018 Deloitte survey of 1,000 corporate executives, a notable 70% indicated an intent to carve off part of their business in response to market conditions or financial needs.
When a divestiture happens there is normally a brand change of some sort for the divested company and this has big implications.
While your leadership team works with business consultants to manage the mechanics of the deal, you as a marketing leader need to focus on marketing strategy. You have the opportunity to help the new brand (or brands) that emerge seize opportunity, preserve existing reputations, and contribute to increasing shareholder value associated with the transaction. This is also the time to begin work on getting a budget created for rebrand rollout. Creating an accurate cost estimate for the rebranding should happen as early in the process as possible—wait, and you may get left behind while your colleagues secure the budgets they need in other operational areas of the business. And equally, don’t risk underestimating the complexity and costs involved in the rebrand process.
As you envision how your new divested brand will evolve, now is the time to identify:
- How the brands will go to market differently
- What new opportunities exist now that you are an independently defined brand
- What is your existing brand equity and how can you leverage that going forward
- What transitional messaging is required
- What will it all cost
- Where can you find efficiencies
- How long will it take
Three questions for marketing in a business divestiture
A corporate divestiture is basically launching a new business — but with existing customers, products, brand reputation, and media and investor relationships. That is true whether the new divested entity remains connected with its original parent in some way or becomes entirely independent.
If you are leading the marketing team for a divested business (let’s call it Newco), you have huge opportunities and challenges around trust, market potential, ROI, and engagement. Now is the time for you to assert ownership of a fresh, stronger play in the sector. Along with your employees, vendors, and all stakeholders, focus on maintaining the positive brand attributes that you have developed in your business, and building the new ones that you are now free to capitalize on.
Here are three big questions to answer:
1. What will the brand(s) be? Your initial strategy should be to understand the full scope of the rebranding and to build alignment around the financial resource and timing implications. Address this very early in the separation process. As business leaders concentrate on uncoupling operations, human resources, IT systems, and other key functions, they lose sight of the marketing ramifications.It’s a huge miss—a delay costs critical time, and the team may miss opportunities to optimize marketing efficiencies as they build the new brand.
If you don’t devote any time to thinking about rebranding—when signage will change, who manages internal communication, and how messaging is shared with the public and investors — costs can spiral, credibility is lost, and big opportunities are missed.
Instead, focus your marketing resources, instill a command and control protocol, and set yourself up for smart brand management going forward. You need a transition plan for all your branded assets, from website and signage to products and packaging and everything else. Adopt a coordinated approach that shows the company is organized, efficient, diligent, and thoughtful. You’ll build trust with your customers and your internal leadership team through control, consistency, and quality.
When your team is involved early, you’ll be able to outline priorities and holistic plans and budgets for rolling out the new brand. And you’ll be equipped to determine which expenses can be capitalized or written off as part of the deal cost.
2. How will you launch the brand into the market?
If your Newco is now an independent entity, your priority is to identify the new brand and deploy it across all branded touchpoints. In these situations, there’s typically a separation agreement that says the child can no longer use the parent name after a period of time, so Newco may be on a compressed timeline to roll out the new brand.
If your Newco remains a majority-owned subsidiary of your original Parentco, and if your new brand leverages the Parentco brand in some way, it is likely that a trademark license agreement may define how your new brand plays in the market.
In either case, prioritize the branded assets you invest in, and know that those priorities may shift through the process. For example, in some cases you may choose not to invest in signage and environments because you’ll have to change it all again in eighteen months after the separation period. Or, you may create smart approaches that offer flexibility for the future state needs. That could mean creating a brand platform system that will allow you to logo swap into the final state in the most efficient way. Another example is creating a signage system that allows you to replace the logo element without changing the sign structure itself.
If you’ve been proactive from the start—scoping and estimating the cost of brand change and securing a firm budget commitment—you’ll be in the best position to approach this phase smartly, in a way that adds to the ROI of the divestiture. And remember that the idea of a big-bang brand launch is generally an illusion. Instead, adopt the 20/80 Rule: Convert 20% of the assets that create 80% of the impact so everyone thinks the brand/rebrand is complete, even if in reality, it’s ongoing.
3. How do we ensure efficient operations?
Think about how to make sure both companies are moving forward and taking advantage of the best practices you have already established. Evaluate your current agency and vendor portfolios to find where there might be redundancies in capabilities, to find efficiencies and cost savings. Review your current processes for creating branded assets across the organization, looking for opportunities for streamlining to save time and perhaps reallocate resources. And think about infrastructure, too. For example, the two organizations might share the existing marketing tech stack for a defined period, but over time, you’ll want to evaluate what systems meet the business needs of your newly combined organization and move towards consolidation.
In the end, it all boils down to management. Put your company’s team in a position to oversee the brand change efficiently and cost-effectively so that you retain both brands’ equity—and maximize the ROI of the divesture—into the future.