Financial Value of Brands in Mergers and Acquisitions: Is Value in the Eye of the Beholder?

• Main Authors: Badahir, Cem, G.Bharadwaj, Sundar, SRIVASTAVA, Rajendra Kumar
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2006
• Subjects: Advertising and Promotion Management; Business; Finance and Financial Management
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/4134; https://ink.library.smu.edu.sg/context/lkcsb_research/article/5132/viewcontent/Financial_Value_of_Brands_in_Mergers_and_Acquisition_Is_Value_in_the_Eye_of_the_Beholder_.pdf
• Institution: Singapore Management University

Firms frequently engage in merger and acquisition deals. In these transactions, brands account for significant but differential proportions of overall transaction value. Extant marketing literature on financial value of brands focuses on drivers of financial value only within a firm. However, in a merger and acquisition context, value of brands also depends on how their new owners might leverage them in the marketplace. This study identifies and empirically tests both the target and acquirer characteristics that affect the value of target firm’s brands in mergers and acquisitions. Furthermore, the authors examine the moderating role of deal type and target firm sales growth on a subset of main effects. The results suggest that target marketing capability and acquirer brand portfolio diversity have positive effect on target’s brand(s) value. Deal type inhibits the impact of acquirer portfolio diversity on target’s brand value. Target firm sales growth inhibits the impact of target’s marketing capability on target’s brand value.