In the 21st-century business world, globalization has been a life-changer for millions around the world. Faster and most efficient communication and technology infrastructure are bringing nations, communities, and businesses closer than ever before (Stone & Ranchhod, 2006). Countries expand their trading, transactions and business operations beyond their own borders. In the modern world, it is hard for any country to proclaim itself self-reliant; rather, it has become inevitable and essential for every nation to establish a globalized business equilibrium. Therefore, executives and business leaders are considering how to expand their businesses globally (Jian, 2004). Thus, advanced combinations of thinking patterns are generating the successful innovative business idea of “cross-border M&A” as an engine of contemporary capitalism (Bertrand & Zuniga, 2006; Erel, Liao, & Weisbach, 2012; Öberg, 2014; Steigner &
Sutton, 2011).
Cross-border M&A is a dominant practice in Foreign Direct Investment (FDI) (Brakman, Garretsen, Van Marrewijk, & Van Witteloostuijn, 2013; Kling, Ghobadian, Hitt, Weitzel, & O'Regan, 2014). It was established as a focal internationalization and corporate growth strategy back in the mid-19th century due to trade liberalization, privatization and industry consolidation (Das & Kapil, 2012; Hogan, Glynn, & Bell, 2006; Junni, 2012; Shimizu, Hitt, Vaidyanath, &
Pisano, 2004; Teerikangas, Very, & Pisano, 2011; Zander & Zander, 2010). Since then, despite some ebbs and flows, M&A gradually became a principal strategic component in the 1960s and 1970s due to conglomerate acquisitions. On the other hand, in the 1980s, M&As increased in incompatible industries and gradually moved forward in the international market with 80% of acquisitions being horizontal in nature (Buckley, Elia, & Kafouros, 2014; Junni, 2012;
Kuzmina, 2009; Öberg & Holtström, 2006).
M&A deals increased until 2007, but a downward trend began in late 2007 due to the economic depression (Evans, Pucik, & Björkman, 2011; Gao, Yu, & Wang, 2012). However, the value of CBM&As was about USD 1.3 trillion during 2014, accounting for around 40% of the total M&As (Reuters, 2014; Shimizu et al., 2004). According to Wall Street Journal, the overall M&As value was USD 4.304 trillion during 2015 (Farrell, 2016). Europe was the most prosperous region with a 44.6% market share of overall CBM&As across the world while the second most attractive region was North America with 22.3%. These figures are based on 1st to the 3rd quarter of M&As reported in 2013 (Mergermarket, 2013).
Though CBM&A is a dominant practice, it is a very challenging strategy. For instance, a study by KPMG found that approximately 17% of CBM&As create value for the shareholders, while 53% destroy it (Shimizu et al., 2004). Usually, the overall failure rate of M&As is about 44% to 56% (Agnihotri, 2013; Kitching, 1974; Schoenberg, 2006). King, Dalton, Daily, and Covin (2004) also found that acquisitions have either a negative or no effect on the acquirer’s performance.
Subsequently, Chunlai Chen and Findlay (2003) and Junni (2012) revealed that post-CBM&A performance falls short of the expectations of many companies. In a nutshell, more than half of CBM&As have been unsuccessful and obstruct value creation (Ambrosini, Bowman, & Schoenberg, 2011; Chatterjee & Banerjee, 2013;
Das & Kapil, 2012; Junni, 2012; Kato & Schoenberg, 2014; Schoenberg, 2006) because of overpayment, overestimated synergies, slow step integration, cultural conflict, and inadequate post-merger communication (Jun, Jiang, Li, & Aulakh, 2014; Rosson & Brooks, 2004).
As a result, acquisition researchers have tried to find various means of value creation in different study fields such as strategic management, human resources, finance, and international business. Usually, the strategic, organizational, economic and cultural fit, M&A process, resource configuration, leveraging and synergies, integration process and portfolio returns are the relevant domains in which to generate acquisition value. However, there is limited attention on corporate brand management in the post-CBM&A setting, although corporate branding is necessary for acquisition value creation (Ambrosini et al., 2011; Barmeyer & Mayrhofer, 2008; Bauer, Matzler, & Wolf, 2014; Chatterjee, 1986; Chunlai Chen & Findlay, 2003; Jemison & Sitkin, 1986;
Rui & Lan, 2011).
The prior studies also noticed that reconfiguring and leveraging the brand resources create acquisition value (Ambrosini et al., 2011; Hem & Nina, 2009;
Junni, 2012). For example, 60% of intangible resources create superior value in the post-CBM&A (Barney, Ketchen, & Wright, 2011; Ellwood, 2002; Ettenson &
Knowles, 2006; Vu, Shi, & Hanby, 2009). Compared to various other constituents, intangible resources are influential in sustaining the acquisition value in the management literature. In recent decades, the principal component of growth potential and companies’ value has been shifting from tangible to intangible resources with cash flow, non-physical form and financial instruments (Tsuda, 2012).
Aaker (1991), Basu (2006), Ettenson and Knowles (2006), Hogan et al. (2006), and Hsiang Ming and Ching Chi (2011) revealed that the success of an acquisition also depends on the brand name and symbolic value of the acquirer and target.
For example, after the deals, half of the M&As significantly dissatisfy the customers within two years, although the customers are less inclined to switch to a new company due to fear of change and their perceived loss of control and voice (Ettenson & Knowles, 2006). Furthermore, within three to five years, 50 to 80 percent of M&As destroy shareholder value because inadequate attention has been paid to soft issues such as stakeholder communication, employee retention, confidence, leadership, vision, corporate culture, integration momentum and speed (Rosson & Brooks, 2004). Strategic, organizational and financial fit are also essential to ensure acquisition performance. However, the brand should be considered to play the central role in the overall corporate strategy because a brand does not mean the corporate name and logo. It is about an organization, operation, customer service, organizational systems, set of associations and expectations concerning a product or company evoked in the consumers’ mind (Johne, 2003; Kumar & Hansted Blomqvist, 2004; Rosson & Brooks, 2004).
Subsequently, corporate branding is a business management issue to generate stakeholder value in order to ensure success in acquisition deals (Rao, Agarwal, &
Dahlhoff, 2004; Štrach & Everett, 2006; Tsuda, 2012).
The corporate brand architecture (CBA) is an element of corporate branding that should be considered during, before and after the acquisition deals. The principal reason is that 85% of corporate commutation is nonverbal (Johne, 2003; Kumar
& Hansted Blomqvist, 2004; Štrach & Everett, 2006; Van Rij, 1996). However, the CBA strategy is corporate brand management that considers branding objects, such as the corporate name, logo, slogan, typography, color, and design (Alamro & Rowley, 2011; Aspara & Tikkanen, 2008; Petromilli, Morrison, &
Million, 2002).
The acquiring firms also maintain corporate communication in post-CBM&A through corporate brand architecture (Bengtsson, Bardhi, & Venkatraman, 2010;
Cheng, Blankson, Wu, & Chen, 2005; Townsend, Cavusgil, & Baba, 2010;
Townsend, Yeniyurt, & Talay, 2009). Examples include P&G, IBM, General Electric, Cisco Systems, Johnson & Johnson, Nike, Gucci, Mercedes-Benz, Sony, Coca-Cola, and Rolex (Chamberlin, 2005; Craig & Douglas, 2000; Khermouch, 2000; Marc Goedhart, Tim Koller, & Wessels, 2010). Prior studies have also revealed that corporate brand architecture provides most of the core value of the acquiring company in post-CBM&A (Kashmiri & Mahajan, 2015; Michell, King, &
Reast, 2001).