Drivers of Brand Acquisition Success: A Focus on Value Creation Following Acquisition Events

Firms should develop, nurture, acquire, and leverage an effectiveness-enhancing portfolio of brands in order to achieve competitive advantage and, thereby, superior financial performance. Many firms often build brand portfolios internally. The internal development of brands, however, is not always an attractive option because it costs the firm a great deal of financial resources. Firms may build their brand portfolios by acquiring external brands. Brand acquisitions can be an efficient way for firms to expand into new target markets and enhance their product portfolio while following a lower risk strategy. Although brand acquisitions are a strategic choice for many firms, there has been limited research as to the effect of brand acquisitions on value creation. Using the resource-advantage theory of competition as an underlying framework, the current study develops an empirically testable model that can explain brand acquisition success. The model was tested with a comprehensive dataset of acquisition events drawn from the Securities Data Company Platinum Database and other secondary sources. The findings of the study show that the acquired brand value, brand fit, the acquirer’s brand management capability, and its diversification have significant effects on abnormal returns and the two-way interaction effects of those variables. The paper presents important implications for research and practice, indicates the limitations of the study, and concludes with the directions of future research.