Naming Mergers and Acquisitions

Naming Mergers and Acquisitions

One of the highest profile brand naming scenarios is a corporate acquisition or merger of corporations. In a merger of equals, which brand name should be used? Recently, such a scenario took place in our own backyard. Naperville-based OfficeMax merging with Boca Raton-based Office Depot. While both corporations are multi-billion in revenue, Office Depot is larger in revenue, employees, and store locations. So barring some major brand equity issues, guess which brand won? Following is some coverage from the venerable CRAINS CHICAGO, and then we will circle back to share thoughts on branding in the category.

OfficeMax loses name; is Naperville HQ next?

By Brigid Sweeney, November 06, 2013

Now that the merger between OfficeMax Inc. and Office Depot Inc. is complete, it’s clear that OfficeMax has lost its name and eventually will lose its CEO. The only question that remains is whether the office-supply company will lose its Naperville headquarters, too.

Based on everything else in the merger, OfficeMax’s chances don’t look good.

Yesterday, the company said the merged entity would be called Office Depot Inc. and will trade on the New York Stock Exchange under the symbol ODP.

No CEO or headquarters decision was announced. OfficeMax CEO Ravi Saligram and Office Depot CEO Neil Austrian will serve as co-CEOs until the new company’s CEO selection committee completes its search. In September, however, Mr. Saligram said he wouldn’t seek the top job at the combined company. For now, both will work from their current offices.

“I was surprised that Ravi dropped out of the running in the CEO race, but it’s not clear if Neil Austrian will be the final CEO candidate,” said Liang Feng, an analyst with Morningstar Inc. in Chicago.

The new headquarters location is similarly uncertain.

But based on size, OfficeMax loses. Office Depot has 1,104 stores in the U.S. compared with OfficeMax’s 828. Office Depot reported 2012 sales of $10.7 billion and employs about 38,000. Office Max had $6.9 billion in 2012 sales and employs about 29,000 people. Office Depot occupies a 625,000-square-foot campus in Boca Raton, Fla., that was constructed in 2007, while OfficeMax’s headquarters, built in 2006, are 361,000 square feet.

“Office Depot is the bigger company, which might signal something, but it’s really very much up in the air,” Mr. Feng said. “At the end of the day, both companies are going to take a look at which location is less disruptive, which location requires fewer people to move and which location might offer better incentives.”

Both OfficeMax and Office Depot were careful not to disclose any details about the future company while the merger was undergoing Federal Trade Commission scrutiny. Now that the FTC has stamped its approval and the merger is finished, Mr. Leng said he expects both co-CEOs to begin discussions about local and state incentives in earnest.

OfficeMax was founded by Bob Hurwitz and Michael Feuer in 1988 in Cleveland and grew rapidly. Kmart Corp. acquired a majority stake in the company in 1991 but spun it off four years later to create a publicly traded entity headquartered in Shaker Heights, Ohio.

In 2003, OfficeMax was sold for $1.5 billion to Boise Cascade Corp. Two years later, it moved its headquarters to Naperville in exchange for an incentive package valued at $20 million. Annual sales reached a high of $13.3 billion in 2004 but began to decline even before the recession hit.

Branding Office Supplies

Ok, so lets look at category branding. STAPLES is the undisputed category leader with over $20 billion in annual revenue, and a very clever brand name. OfficeMax and OfficeDepot are weaker competitors with seemingly copycat brand names, the latter copying the branding of the largest home improvement retailer. Who was first?  No matter. Both of these weaker brands reinforce big-box, when big-box was everything. Now big-box is not so everything, if not passé.

Unknown is brand equity. Which brand has the strongest perception by consumers and business customers?  Which brand has negative perceptions or identity issues? Which brand has the better website and digital marketing assets?  Surely the corporate behemoths and their consultants considered all aspects of brand equity and positioning, but on the face of it, the larger corporation won the battle of the brands, and the strongest brand in the category, STAPLES, is still king.

For a complimentary brand equity and brand naming strategy evaluation, do contact IDeas BIG (brand identity group). In the meantime, please share this information using our social tools below.

Other Merger and Acquisition Branding Resources:

How to Measure Brand Equity-Market Research Association

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