Of Brand Acquisitions and NOT Geopolitics

PS – This article has no relation to any corporate or geo-political situations. The companies are fictional and any coincidence to real people, companies, countries or regions are purely coincidental. The author says SARry if any feelings have been hurt.

Let’s assume that we are working in a company called PR-See. Now this company has been a long standing, steady-state giants that we hear of, heritage name and all, conservative and growing slowly but surely. It’s somewhere in the 90s, and though floundering along, PR-See has reached a certain level. There are two change events which happen in the next few years

1. A change in the top guard, who believe that PR-See needs to find its way to the top of the charts because that’s its destiny
2. PR-See acquires a new company called H-Kay (with its flagship H-Kay brand). This brand is diametrically opposite to what PR-See stands for – modern, loyal customer set who swear by it, fast moving and premium. H-Kay becomes the jewel crown for PR-See to achieve it’s destiny, and why not? It’s a great acquisition, a small and powerful brand which contributes to 30% of PR-See’s sales.

Cut to 2019. The top guard at PR-See, through other cost cutting principles, shrewd acquisitions, development of infrastructure and Leveraged Buyouts sees the organic sales of PR-See rising and rising and soon beats all its rivals to become the largest company in the world. H-Kay retains its identity and operates as an independent company, growing slowly but surely. For a few years all seems good, till H-Kay perceives it is losing its identity because of the following reasons:

1. PR-See, through an internship program called “Anchor Babies” has now got 20% of PR-See employees entrenched in H-Kay
2. While inside the office of H-Kay, the old logo remains, it has been replaced by all the corporate identification marks of PR-See outside
3. The CEO of H-Kay is originally from PR-See
4. Employees of H-Kay are being forced to speak the “language” of PR-See.

For PR-See it makes sense to do what they are doing because:

1. The contribution of H-Kay to PR-See's sales has reduced to 3%. It is not even among the top 5 brands of PR-See, and even for this small contribution they have a back up plan in case H-Kay gets dissolved. They have created two other brands M-Cow across its horizontal synergies and Its-Zen across its vertical synergies. Both Its-Zen and M-Cow, which were earlier without their factories and were just tapping on excess production from H-Kay have been given their own factories with international licences.
2. The Gross Margin of H-Kay is the lowest in PR-See’s entire portfolio, and they have not been able to get it up
3. The workers of H-Kay are asking for expansions to help the brand grow and reduce costs by tapping on synergies, however it has been refused because it will weaken the Go-Green initiative of PR-See, which mandate that H-Kay remains at 70% green levels.
4. The values and beliefs of H-Kay are so diametrically opposite, it is discouraging some die-hard supporters of PR-See’s newly built power brands, who feel that building H-Kay further will eat into their share. They get some anchor babies to fight violently so that PR-See’s ombudsman can step in
5. Since this was the largest power brand they acquired, PR-See can start building its own legacy on their other acquisitions by showing them that they can profit hugely by putting all faith in their CEO – they just must give up a few things. Else they face getting jettisoned by PR-See with huge ramifications. For example, all PR-See’s acquisitions have been given interest free loans. The moment they quit, they need to pay back the money with interest, but they have grown to love their newfound lavish lifestyles.

What are the prospects of H-Kay?

As a brand, not too bright. It has had its glory days but cannot prosper in PR-See in its current state. Its brand equity is high, so PR-See will not sell it to other companies like U-Sam, even though many of its employees feel it will be better off there. The employees of H-Kay who form its core are looking for jobs outside or those who still believe in it are revolting against the top brass. Factories are being irrevocably damaged in this crossfire. Meanwhile, the investors are rejoicing today as the stock of H-Kay just increased because A-Ba (a subsidiary of PR-See) purchased further stakes in H-Kay. However, A-Ba deals in only the new power brands of PR-See, thus H-Kay will rely more than ever on PR-See to survive.