To rebrand or not? It’s a big question for pharma companies before and after acquisitions—and one answered with “yes” more often than in other industries. Pharma, in fact, was the most prolific rebrander in Brand Finance’s recent research assessing the value of rebrands across 25 industries.
It’s also one of the most successful, with rebrands in pharma generating average returns of 13.8%, according to Brand Finance calculations. The main reason? Most acquired pharma brands are weaker than the acquiring ones, the study found.
Pharma rebranded 31% of the companies acquired in deals during the five-year study period beginning Jan. 2014 and ending Dec. 2018. That figure was just ahead of the healthcare (30%), telecom (29%) and oil and gas (25%) industries. The study assessed all deals valued at $500 million or more.
Most acquisitions don’t end in rebrands—overall, only 21% of large buyouts result in name changes, the brand valuation consultancy found. However, there are reasons why pharma more often renames the companies it buys.
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Many of the acquisitions are small pharma or biotech companies with promising drugs snapped up by bigger companies looking to commercialize those treatments. The bigger buyers’ marketing systems, broad client networks and better-known reputations make name changes in those cases more successful, Alex Haigh, Brand Finance valuation director, said in an email interview.
Another reason pharma often rebrands companies is unique to the industry. Drugmakers make strategic divestments to other pharma brands—such as when Eli Lilly’s Elanco animal health division acquired Novartis Animal Health. Rebranding the purchased asset is necessary to avoid confusion with the previous owner.
Yet another reason? Pharma companies have lots of M&A experience and are more adept at handling rebrands.
“Pharmaceutical companies tend to be very experienced in mergers and acquisitions. Of the eight companies with the most rebranded acquisitions, three are pharmaceutical companies—Allergan, Lilly and Roche—while there are only one of each other type of sector represented. Companies which are experienced in integrating acquisitions tend to be more likely to rebrand and have better results,” Haigh said.
Of course, that doesn’t mean all pharma rebrands are a slam dunk. As in other industries, rebrands require assessment even before a deal is finalized. Companies need to consider the benefits of a rebrand, such as when acquisitions add products that could boost revenue with the buying companies’ clients.
Haigh pointed to the Actavis acquisition of Forest Labs as one of the most successful pharma acquisitions in the study. At the time in 2014, Forest’s products—particularly in women’s health and gastroenterology—complemented Actavis’ products in those same areas. Rebranding Forest to Actavis helped the combined company break through with key physicians and markets, he said.
One of the least successful rebrands in the study was Mylan’s purchase of Sweden-based Meda Pharmaceuticals. Mylan paid double the share price for Meda at the point of sale, assuming it would reap significant benefits in new markets like China, Haigh said. However, the business had changed considerably in the time between when the price was set and the deal was finalized in 2016.
The examples highlight the importance of research, analysis and valuation of both brands, Haigh said. Communication is also key and played an important role in the most successful rebrands in the study. Clearly spelling out brand or rebrand intentions to both the companies’ employees and their investors will not only smooth transitions but also keep expectations and reality in sync.
Source: Fierce Pharma