As I have been searching and networking I've uncovered several friendly competitors in a blue collar services space. One owner introduced me to two more. I may be in a position to acquire 2 or 3 companies in a relatively short period. I'm thinking through the pros/cons of the approach and one issue I'm struggling with is how to handle the brands.
All three have excellent names, are highly respected, etc. Do any successful searchers have experience with acquiring competitors and what did you all do with the company/brand names? What do you wish you'd done?
For reference, one of the companies is ~$5M in revenue, one is $1.7M, and the other is just over $1M. In the event all three were acquired the new enterprise would still be a mid-sized player in our industry/location leaving room to take market share.
Acquiring Competitors - What to do with company names (brand)?
by a searcher from University of Edinburgh - Business School
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Perceived fit of the brand: If we are rolling up within the same category or complementary categories the evidence shows greater customer recall than if the brand categories have a poor fit. There would be greater value in a consolidated brand for businesses that have a similar customer type or category entry points for example HVAC & refrigeration as opposed to industrial manufacturing & aged care. Based on your post, this sounds like a good fit.
Current brand value of the acquired entity: If this is a small entity with single digit market share in the region, you are probably not losing a lot, especially if the new brand has a greater value to the same customer segment. If the rebadged brand already has a greater market share and servicing the same customers and location, I would be happier to proceed. Be mindful of this discount in your valuation and forecasting during acquisition.
Corporate strategy: Although you must ask yourself about brand fit and value first, this is the most important factor of all. Does the combined entity plan to aggressively grow market share of the combined entities, either organically or through acquisition? A singular brand with a plurality or majority of market share will be more effective than two separate brands once we surpass double digits in market share. Research varies on where the inflection point sits, but directionally the benefits of a singular brand compound as market share grows because it allows the brand to reach the light buyers in the category, the biggest but hardest to reach segment. However, if the motivation for the rollup is being made primarily as a source of stable cash flow and pricing power without the intent of aggressively growing the combined entity, you may want to take a more defensive posture and retain the separate brands.