How to unlock the intangible in brand equity with 4P’s

In a dynamic and ever-evolving business landscape, the financial power of brand equity is increasingly recognised as a critical factor in mergers and acquisitions (M&As).

During the final Breakthrough Session of 2024, Sergio Brodsky, Chief Strategy Officer at Surge and renowned brand and foresight consultant, delved into the vital role that strategic branding plays in corporate integration and value creation. Brodsky, who has an extensive background with international experience and contributions to the World Economic Forum, emphasised that in today’s market, a well-defined brand can be the key differentiator for businesses looking to merge, acquire or scale.

“Brand is often the most valuable piece of real estate—it’s the corner of someone’s mind,” Brodsky stated, referencing Warren Buffett’s famous insight into the power of brand memory and association. He continued, “The value of a brand is intangible, but it’s critical. It can shape mergers, acquisitions, and even the overall success of companies.”

Why Brand Equity Matters in M&As

Brodsky highlighted that up to 80% of the value of companies listed in the S&P 500 is tied to intangible assets, with brand being a primary component. However, he noted that many M&As overlook the power of branding until it’s too late. “Often, companies focus on operational and financial elements in a merger, leaving the brand as an afterthought,” he remarked. “But research shows that transactions that prioritise brand equity are far more likely to succeed.”

He cited a study conducted by PwC which found that companies taking a brand-led approach outperform others by 82%. According to Brodsky, integrating brand strategy into the M&A process can be the difference between creating a cohesive, value-driven business and a failed integration. “Brand helps build a shared narrative that brings teams, investors, and customers together,” he said, stressing that this narrative becomes the glue that binds multiple entities into one unified and successful organisation.

The Four Pillars of Brand Equity

Breaking down the components of brand equity, Brodsky outlined four critical elements that every company should consider: understanding, reputation, utility and uniqueness.

• Understanding: More than simple awareness, understanding is about ensuring that the audience grasps what the brand offers and how it meets their needs. Brodsky shared the example of the Australian Education City, which was rebranded to Cition. “The brand’s previous name was unclear, holding the project back for nearly seven years. A simple rebrand led to investment within days,” he explained, highlighting how clarity and understanding can directly impact financial outcomes.
• Reputation: Brodsky emphasised the importance of building a reputation associated with quality and reliability. He shared the success story of RXBAR, a health food product that transformed its positioning by transparently listing ingredients on its packaging with the bold statement, “No BS.” This refresh led to a $600 million acquisition by Kellogg’s, proving that reputation, when leveraged correctly, can significantly elevate brand value.
• Utility: For brands to thrive, they must prove their relevance by solving problems or fulfilling ambitions. Using the iconic Disney-Pixar merger as an example, Brodsky described how Pixar’s innovation in animation technology revitalised Disney, driving $14 billion in box office revenue and boosting the brand’s overall valuation. “Disney’s ability to harness Pixar’s value and integrate it into its own ecosystem was a masterclass in leveraging utility for brand growth,” he stated.
• Uniqueness: According to Brodsky, uniqueness is the most critical factor for long-term success. “Brands that stand out attract the most investment and command higher pricing power,” he argued, citing Tesla’s 13,000% stock price increase as a result of its distinct market positioning. “Differentiation, even in a crowded space, is a powerful driver of value.”

The Crucial Role of Trust in M&As

During the session, Brodsky also explored the concept of trust and its importance in brand-led M&As. He discussed the trifecta of trust: competence, integrity and benevolence. “Without trust, every transaction becomes costly because transparency needs to be absolute. Trust is about having competence, but not at the expense of everything else,” he explained. By ensuring consistency and reliability, brands can build the kind of trust that drives successful mergers and acquisitions.

“Without trust, every transaction becomes costly because transparency needs to be absolute. Trust is about having competence, but not at the expense of everything else.”

AI and the Future of Brand Equity

With the rise of AI technology, Brodsky highlighted an emerging opportunity for brands to differentiate themselves in this space. “AI is very much like energy—it’s essential but invisible when it works well,” he noted. Companies that successfully build strong AI brands, which resonate with utility, reliability, and distinctiveness, will gain a significant edge in the market.

When asked about Elon Musk’s brand influence, Brodsky acknowledged the controversial nature of Musk’s strategies, stating, “He’s destroyed value with some decisions, especially with X, but his brand equity has the potential to create immense value in the long run.” This duality of value and risk underlines the importance of strategic brand management, especially in a high-stakes environment like the tech sector.

Closing the session, Brodsky reiterated that brand is not merely a marketing expense but a long-term investment. “Building a strong brand is essential, especially in an era where businesses can become commoditised. A unique, trusted brand can command higher value and drive substantial growth,” he concluded.

His final message was clear: in the world of M&As, where success rates hover precariously between 70-90% failure due to the neglect of intangible assets, prioritising brand is not just an option; it’s a necessity. “Build a strong brand, and you won’t sink—you’ll surge.”