JUSTICE MITCHELL

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The Problem With Massive Brand Acquisitions

The 800 pound gorilla Microsoft devours yet another company — Minecraft – for $2.5 billion. Some of you who will be excited about this acquisition and others will hate it. Why the polarity? It all comes down to "brand equity" on both ends of the spectrum.

If you live any kind of digital lifestyle (and obviously you do, or you wouldn't be reading anything written by moi), you probably have an opinion positive or negative regarding Microsoft. This opinion informs a perception of the brand's essence to you and holds brand equity. In many cases, the acquisition of a lesser brand by a larger brand (that you love) is met with a great amount of fanfare and hope for the future of the product.

Consider Instagram. While everyone thought $1 billion was insane to pay for it at the time, Facebook apparently disagreed. Both brands increased their popularity exponentially and credibility by being now under the same umbrella.

Herein lies the double-edged sword that comes with brand acquisitions. Most people loyal to the lesser brand are going to take into account their opinion of the larger brand and hybridize the two together. Given that you feel strongly (positive or negative) about the purchasing brand, it will definitely affect your perception, loyalty and trust with the acquiree.

Take for instance Insight Venture Partners. This relatively silent company has an absolute impeccable portfolio of technological diversification.  But they are in the business of purchasing, building, and then reselling. They understand that making a splash with their brand acquisition or investment in a technology product can adversely sway user/customer opinion of the product. Think of them has a nuclear tactical submarine: highly effective, but you never know they were there. Once Insight builds up and repositions a brand, they can resell it to a company like Google or Microsoft. The new acquiring company will then make great fanfare about its purchase, thereby starting the process covered in this article.

So in some instances, massive acquisition between two brands can be beneficial if there is a positive opinion about both. If there is not, however ...

Well – remember Tumblr and Yahoo?

Exactly. I rest my case.

Burger King and Tim Hortons? Hell. I don't know. I like burgers and doughnuts!

Look I'm certainly not worth billions of dollars, nor can I make investments such as the ones described here. However, I'm not too shabby when it comes to brand development and utilizing all the social channels and content means at my disposal in order to exploit it. It seems to me that brands with a negative public perception would reduce the potential value of an acquisition by aligning it immediately with their brand.

Microsoft could buy their own country, So it shouldn't be a challenge for them to form a silent company for the purpose of making acquisitions such as Minecraft. Then they could slowly merge them into the fabric of the more high-profile brand.

While I've been talking about some extremely large brands and their acquisitions, remember the potential backlash on your own brand equity based on the alignments you make. For instance, if you intend to utilize a product or relationship as the backbone to your service, it will come with a history of user opinion. Do your due diligence on any customer-facing relationships that you do not solely control.

 And with that – peace out, bitches. I have to meet Elon Musk on my private island ;)