30/08/2011

By Elly Woolston, Client Partner, {United} And One Of The Founding Partners Of Proximity London

What are the implications when smaller companies are bought by corporations that don't have the same values and beliefs?

In today's somewhat unstable business environment, acquisitions are common, with small companies being sold to huge multinationals to either save their own operations or to boost those of bigger firms. However, from the minute a smaller business is bought and integrated into a larger company, the buyer has the potential to change the
company, including staffing, processes, and even core values.

It's essential that a business retains the values and beliefs it held prior to being bought out in order to retain customers who have remained loyal throughout its growth. Consumers should not be able to see any changes through products or services, as these are probably what attracted them to the business in the first place. It is also good practice for companies to reassure its loyal customers that their belief and values have not been altered and they will endeavour to retain them. For example, when Innocent, the sustainable and natural drinks company, was bought out by the Coca Cola Company, it was quick to reassure customers that nothing would change about its values. However sometime later many consumers were disappointed when this appeared not to be the case.

Another key audience to keep happy following a merger is staff. It's crucial to support them through the process and make assurances that values will remain the same. If this does not happen and major changes occur to the company's ethos then staff may decide to leave, in turn taking their experience of delivering the firm's values with them.
These companies need to hold onto their employees in order to ensure they retain the beliefs they previously held as an independent. The original staff will also be able to educate new recruits so that the company values can carry on into the future and beyond, so keeping both loyalty and company values in tact is essential.

It's also important that the wider industry is assured that
smaller companies will not be making any changes to their
values; otherwise their reputation will be damaged in the long run. Pret A Manger based its beliefs on avoiding additives, using recycled packaging and buying organic. In 2001 a third of the company was sold to fast food giant, McDonald's. In defence of the sale, Pret A Manger's commercial director Simon Hargraves argued that McDonald's would never have any day-to-day role in business or any say in the making of products. As a result the company made it clear to the industry that the values the business was built on will not change after being sold, in order to remain respected amongst peers and analysts.

Another recent trend in this area is so called 'ethical
mainstreaming'
: the takeover of socially aware companies as a way for multinationals to move into the ethical sector. These large companies realise that values and corporate responsibility are rapidly becoming highly profitable trends and are good ways of engaging with a particular sector of the consumer market. Regardless of being bought, it is up to the company to maintain its beliefs in order to retain the same levels of success, respect and loyalty prior to takeover. Consequently companies that are bought by multinationals should stay true to what they believe in. Otherwise the business risks losing customers, staff and respect in the industry, but most importantly it will lose the impact it aimed to bring to the industry it represents and to society in general.