Financial Value of Brands in Mergers and Acquisitions: Is Value in the Eye of the Beholder?

Journal of Marketing, Vol. 72, pp. 49-64, November 2008

Posted: 10 Apr 2011

See all articles by S. Cem Bahadir

S. Cem Bahadir

University of North Carolina at Greensboro

Sundar G. Bharadwaj

University of Georgia--Terry School of Business; University of Georgia - C. Herman and Mary Virginia Terry College of Business

Rajendra K. Srivastava

Singapore Management University - Lee Kong Chian School of Business

Date Written: November 1, 2008

Abstract

In mergers and acquisitions (M&As), brands account for significant but heterogeneous proportions of overall transaction value. The marketing literature focuses on the drivers of financial value of brands when there is no change in the ownership of brands. However, in M&As, the value of brands also depends on how their new owners leverage them. This study identifies both the target and the acquirer firm characteristics that affect the value of a target firm’s brands in M&As. The study uses audited measures of acquired brand value from Securities and Exchange Commission filings (made available as a result of recent statutory reporting requirements) along with data collected from diverse secondary sources. The empirical test of the model is based on 133 M&A transactions in which acquirers attribute value to target firms’ brands. The results indicate that acquirer and target marketing capabilities and brand portfolio diversity have positive effects on a target firm’s brand value. The positive impact of acquirer brand portfolio diversity and target marketing capability is lower when the M&A is synergistic than when it is nonsynergistic. The findings are robust to various model specifications, measures, endogeneity, and sample selection.

Keywords: brand valuation, brand equity, marketing capability, brand portfolio, mergers and acquisitions

JEL Classification: M31

Suggested Citation

Bahadir, S. Cem and Bharadwaj, Sundar G. and Srivastava, Rajendra K., Financial Value of Brands in Mergers and Acquisitions: Is Value in the Eye of the Beholder? (November 1, 2008). Journal of Marketing, Vol. 72, pp. 49-64, November 2008, Available at SSRN: https://ssrn.com/abstract=1804665

S. Cem Bahadir (Contact Author)

University of North Carolina at Greensboro ( email )

347 Bryan Building
516 Stirling Street
Greensboro, NC 27402
27402 (Fax)

Sundar G. Bharadwaj

University of Georgia--Terry School of Business ( email )

105 Brooks Hall
Athens, GA 30602
United States

University of Georgia - C. Herman and Mary Virginia Terry College of Business ( email )

Brooks Hall
Athens, GA 30602-6254
United States

Rajendra K. Srivastava

Singapore Management University - Lee Kong Chian School of Business ( email )

469 Bukit Timah Road
Singapore 912409
Singapore

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