Brand acquisitions and disposals are key strategic marketing decisions and often the largest single marketing investments that firms make. Yet little is known about the performance effects of such decisions. This study examines stock market reactions to brand acquisition and disposal announcements in 31 consumer industries. The results reveal that returns to such announcements depend crucially on three complementary firm assets—marketing capabilities, channel relationships, and brand portfolios—but that these effects may not be symmetric across brand acquisitions and disposals. Acquirer abnormal returns are greater for firms with strong marketing capabilities and those that buy brands with higher price/quality positioning than their existing portfolio. Investors also reward buyers that identify cost synergies in integrating new brand(s) into their portfolios but punish those that identify revenue synergies. Conversely, greater abnormal returns arise for sellers with inferior channel relationships and for those selling multiple brands, brands with relatively lower price/quality positioning than the seller's remaining portfolio, and brands unrelated to the rest of the seller's portfolio. The results from a paired subsample provide new knowledge about the positive net shareholder wealth created from brand acquisition–disposal transactions and indicate a strong role of marketing capabilities in creating this wealth.
AakerDavid A., and JacobsonRobert, (1994), “The Financial Information Content of Perceived Quality,”Journal of Marketing Research, 31(May), 191–201.
2.
AmitRaphael, and SchoemakerPaul J. H., (1993), “Strategic Assets and Organizational Rent,”Strategic Management Journal, 14(1), 33–46.
3.
AtamanBerk, MelaCarl F., and van HeerdeHarald J., (2008), “Building Brands,”Marketing Science, 27(November–December), 1036–1054.
4.
BahadirS. Cem, BharadwajSundar G., and ParzenMichael, (2009), “A Meta-Analysis of the Determinants of Organic Sales Growth,”International Journal of Research in Marketing, 26(1), 263–75.
5.
BahadirS. Cem, and SrivastavaRajendra K., (2008), “Financial Value of Brands in Mergers and Acquisitions: Is Value in the Eye of the Beholder?”Journal of Marketing, 72 (November), 49–64.
6.
BarneyJay, B., (1986), “Strategic Factor Markets: Expectations, Luck, and Business Strategy,”Management Science, 32(10), 1231–41.
7.
BarneyJay, B., (1988), “Returns to Bidding Firms in Mergers and Acquisitions: Reconsidering the Relatedness Hypothesis,”Strategic Management Journal, 9(1), 71–78.
8.
BarneyJay, B., (1989), “Asset Stocks and Sustained Competitive Advantage: A Comment,”Management Science, 35(12), 1511–13.
9.
BerghDonald D., JohnsonRichard A., and DewittRocki-Lee, (2008), “Restructuring Through Spin-Off or Sell-Off: Transforming Information Asymmetries into Financial Gain,”Strategic Management Journal, 29(2), 133–48.
10.
BradleyMichael, DesaiAnand, and Han KimE., (1988), “Synergistic Gains from Corporate Acquisitions and Their Division between the Stockholders of the Target and Acquiring Firms,”Journal of Financial Economics, 21(1), 3–40.
11.
BrownStephen J., and WarnerJerold B., (1980), “Measuring Security Price Performance,”Journal of Financial Economics, 8(September), 205–58.
12.
BrunerRobert, F., (1988), “The Use of Excess Cash and Debt Capacity as a Motive for Merger,”Journal of Financial and Quantitative Analysis, 23(2), 199–217.
13.
CapronLaurence, and HullandJohn, (1999), “Redeployment of Brands, Sales Forces and General Marketing Management Expertise Following Horizontal Acquisitions: A Resource-Based View,”Journal of Marketing, 63(April), 41–54.
14.
CarlottiStephen J., CoeMary Ellen, and PerryJesko, (2004), “Making Brand Portfolios Work,”McKinsey Quarterly, 4(Autumn), 26–36.
15.
ChatterjeeSayan, (1986), “Types of Synergy and Economic Value: The Impact of Acquisitions on Merging and Rival Firms,”Strategic Management Journal, 7(2), 119–39.
16.
ChiTailan, (1994), “Trading in Strategic Resources: Necessary Conditions, Transaction Cost Problems, and Choice of Exchange Structure,”Strategic Management Journal, 15(4), 271–90.
17.
DierickxIngemar, and CoolKarel, (1989), “Asset Stock Accumulation and Sustainability of Competitive Advantage,”Management Science, 35(12), 1504–11.
18.
DuttaShantanu, NarasimhanOm, and RajivSurendra, (1999), “Success in High-Technology Markets: Is Marketing Capability Critical?”Marketing Science, 18(4), 547–68.
19.
DuttaShantanu, ZbarackiMark J., and BergenMark, (2003), “Pricing Process as a Capability: A Resource-Based Perspective,”Strategic Management Journal, 24(7), 615–30.
20.
FamaEugene F., FisherLawrence, JensenMichael C., and RollRichard, (1969), “The Adjustment of Stock Prices to New Information,”International Economic Review, 10(1), 1–21.
21.
FamaEugene F., and FrenchKenneth R., (1993), “Common Risk Factors in the Returns on Stocks and Bonds,”Journal of Financial Economics, 33(1), 3–56.
22.
GeyskensInge, GielensKatrijn, and DekimpeMarnik G., (2002), “The Market Valuation of Internet Channel Additions,”Journal of Marketing, 66(April), 102–119.
23.
GielensKatrijn, Van De GuchtLinda M.SteenkampJan-Benedict E.M., and DekimpeMarnik G., (2008), “Dancing with a Giant: The Effect of Wal-Mart's Entry into the United Kingdom on the Performance of European Retailers,”Journal of Marketing Research, 45(October), 519–34.
24.
GrucaThomas S., and RegoLopo L., (2005), “Customer Satisfaction, Cash Flow, and Shareholder Value,”Journal of Marketing, 69(July), 115–30.
25.
HaywardMathew L.A., and HambrickDonald C., (1997), “Explaining the Premiums Paid for Large Acquisitions: Evidence of CEO Hubris,”Administrative Science Quarterly, 42(1), 103–127.
26.
HeckmanJames, J., (1979), “Sample Selection Bias as a Specification Error,”Econometrica, 47(1), 153–61.
27.
HillSam, EttensonRichard, and TysonDane, (2005), “Achieving the Ideal Brand Portfolio,”Sloan Management Review, 46(2), 85–90.
28.
HoustonJoel F., JamesChristopher M., and RyngaertMichael D., (2001), “Where Do Merger Gains Come From? Bank Mergers and the Perspective of Insiders and Outsiders,”Journal of Financial Economics, 60(2–3), 285–331.
29.
KapfererJean-Noel, (2004), The New Strategic Brand Management.Sterling, VA: Kogan Page.
30.
KaplanSteven N., and WeisbachMichael S., (1992), “The Success of Acquisitions: Evidence from Divestures,”Journal of Finance, 47(1), 107–138.
31.
KellerKevin Lane, and LehmannDonald R., (2006), “Brands and Branding: Research Findings and Future Priorities,”Marketing Science, 25(6), 740–59.
32.
KingDavid R., DaltonDan R., DailyCatherine M., and CovinJeffrey G., (2004), “Meta-Analyses of Post-Acquisition Performance: Indicators of Unidentified Moderators,”Strategic Management Journal, 25(2), 187–200.
33.
KirmaniAmna, and RaoAshkay R., (2000), “No Pain, No Gain: A Critical Review of the Literature on Signaling Unobservable Product Quality,”Journal of Marketing, 64(April), 66–79.
34.
KnudsenTrond R., FinskudLars, TörnblomRichard, and HognaEgil, (1997), “Brand Consolidation Makes a Lot of Economic Sense,”McKinsey Quarterly, 4(Autumn), 189–93.
35.
KothariS.P., and WarnerJerold B., (2007), “Econometrics of Event Studies,” in Handbook of Corporate Finance, EckboB.E., ed. Amsterdam: North-Holland, 3–36.
36.
LaforetSylvie, and SaundersJohn A., (2005), “Managing Brand Portfolios: How Strategies Have Changed,”Journal of Advertising Research, 45(3), 314–27.
37.
LangLarry, PoulsenAnnette, and StulzRene M., (1995), “Asset Sales, Firm Performance, and the Agency Costs of Managerial Discretion,”Journal of Financial Economics, 37(1), 3–37.
38.
MacKinlayA. Craig, (1997), “Event Studies in Economics and Finance,”Journal of Economic Literature, 35(March), 13–39.
39.
MakadokRichard, (2001), “Towards a Synthesis of the Resource-Based View and Dynamic-Capability Views of Rent Creation,”Strategic Management Journal, 22(4), 387–401.
40.
MaloneyMichael T., McCormickRobert E., and MitchellMark L., (1993), “Managerial Decision-Making and Capital Structure,”Journal of Business, 67(2), 1–43.
41.
McWilliamsAbigail, and SiegelDonald, (1997), “Event Studies in Management Research: Theoretical and Empirical Issues,”Academy of Management Journal, 40(June), 626–57.
42.
MizikNatalie, and JacobsonRobert, (2009), “Valuing Branded Businesses,”Journal of Marketing, 73(November), 153–74.
43.
MoellerSara B., SchlingemannFrederik P., and StulzRene M., (2005), “Wealth Destruction on a Massive Scale? A Study of Acquiring-Firm Returns in the Recent Merger Wave,”Journal of Finance, 60(2), 757–82.
44.
MontgomeryCynthia A., and HariharanS., (1991), “Diversified Expansion by Large Established Firms,”Journal of Economic Behavior and Organization, 15(1), 71–89.
45.
MorganNeil A., and RegoLopo L., (2009), “Brand Portfolio Strategy and Firm Performance,”Journal of Marketing, 73(January), 59–74.
46.
MorganNeil A., SlotegraafRebecca J., and VorhiesDouglas W., (2009), “Linking Marketing Capabilities with Profit Growth,”International Journal of Research in Marketing, 26(1), 284–93.
47.
MorganNeil A., VorhiesDouglas W., and MasonCharlotte H., (2009), “Market Orientation, Marketing Capabilities, and Firm Performance,”Strategic Management Journal, 30(8), 909–920.
48.
PalichLind E., CardinalLaura B., and MillerChet C., (2000), “Curvilinearity in the Diversification–Performance Linkage: An Examination of Over Three Decades of Research,”Strategic Management Journal, 21(2), 155–74.
49.
ParkChan Su, and SrinivasanV., (1994), “A Survey-Based Method for Measuring and Understanding Brand Equity and its Extendibility,”Journal of Marketing Research, 31(May), 271–88.
50.
PerreaultWilliam D.Jr., and LeighLaurence E., (1989), “Reliability of Nominal Data Based on Qualitative Judgments,”Journal of Marketing Research, 26(May), 135–48.
51.
PierceAndrew, and MoukanasHanna, (2002), “Portfolio Power: Harnessing a Group of Brands to Drive Profitable Growth,”Strategy & Leadership, 30(5), 15–20.
52.
RaoAkshay R., QuLu, and RuekertRobert W., (1999), “Signaling Unobservable Product Quality Through a Brand Ally,”Journal of Marketing Research, 36(May), 258–68.
53.
RaoVithala R., AgarwalManoj K., and DahlhoffDenise, (2004), “How Does Branding Strategy Affect the Intangible Value of a Corporation?”Journal of Marketing, 68(October), 126–41.
54.
RappaportAlfred, (1997), Creating Shareholder Value: A Guide for Managers and Investors.New York: The Free Press.
55.
RegoLopo L., BillettMatthew T., and MorganNeil A., (2009), “Consumer-Based Brand Equity and Firm Risk,”Journal of Marketing, 73(November), 47–60.
56.
RosaJose Antonio, SpanjolJelena, and PoracJoseph F., (2004), “Textual Analysis as a Tool for Assessing Marketing Strategy Performance,” in Assessing Marketing Strategy Performance, MoormanChristine, and LehmannDonald R., eds. Cambridge, MA: MSI, 185–209.
57.
SethAnju, SongKean P., and Richardson PettitR., (2002), “Value Creation and Destruction in Cross-Border Acquisitions: An Empirical Analysis of Foreign Acquisitions of U.S. Firms,”Strategic Management Journal, 23(10), 921–40.
58.
SimonCarol J., and SullivanMary W., (1993), “The Measurement and Determinants of Brand Equity: A Financial Perspective,”Marketing Science, 12(Winter), 28–52.
59.
SimoninBernard L., and RuthJulie A., (1998), “Is a Company Known by the Company It Keeps? Assessing the Spillover Effects of Brand Alliances on Consumer Brand Attitudes,”Journal of Marketing Research, 35(February), 30–42.
60.
SrinivasanRaji, and BharadwajSundar, (2004), “Event Studies in Marketing Strategy Research,” in Assessing Marketing Strategy Performance, MoormanChristine, and LehmannDonald R., eds. Cambridge, MA: Marketing Science Institute, 9–28.
61.
SrivastavaRajendra K., ShervaniTasadduq A., and FaheyLiam, (1998), “Market-Based Assets and Shareholder Value: A Framework for Analysis,”Journal of Marketing, 62(January), 2–18.
62.
StahlGunter K., and VoigtAndreas, (2008), “Do Cultural Differences Matter in Mergers and Acquisitions? A Tentative Model and Examination,”Organization Science, 19(1), 160–76.
63.
VaradarajanP. Rajan, DeFantiMark P., and BuschPaul S., (2006), “Brand Portfolio, Corporate Image, and Reputation: Managing Brand Deletions,”Journal of the Academy of Marketing Science, 34(2), 195–205.
64.
VaraiyaNikhil, P., (1988), “The ‘Winner's Curse’ Hypothesis and Corporate Takeovers,”Managerial and Decision Economics, 9(3), 209–219.
65.
VorhiesDouglas W., and MorganNeil A., (2005), “Benchmarking Marketing Capabilities For Sustained Competitive Advantage,”Journal of Marketing, 69(January), 80–94.
66.
WrightPeter, and FerrisStephen P., (1997), “Agency Conflict and Corporate Strategy: The Effect of Divestment on Corporate Value,”Strategic Management Journal, 18(1), 77–83.
Supplementary Material
Please find the following supplemental material available below.
For Open Access articles published under a Creative Commons License, all supplemental material carries the same license as the article it is associated with.
For non-Open Access articles published, all supplemental material carries a non-exclusive license, and permission requests for re-use of supplemental material or any part of supplemental material shall be sent directly to the copyright owner as specified in the copyright notice associated with the article.
