Getting what you’re worth: Implications that affect firm value in a brand acquisition

Monica B. Fine, Kimberly Gleason () and Desi Budeva
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Monica B. Fine: Coastal Carolina University
Kimberly Gleason: University of Pittsburgh
Desi Budeva: Ramapo College of New Jersey

Journal of Brand Management, 2016, vol. 23, issue 5, No 4, 70-96

Abstract: Abstract To enhance brand equity, firms can deploy different marketing communication elements, such as advertising, promotions, and sponsorships, which create brand awareness (i.e., recall and recognition) and ultimately positive, unique associations. Instead of starting from scratch, though, companies often prefer to avoid costly development by acquiring existing brands. Prior research, however, has indicated that acquiring firms suffer from a “winner’s curse,” which results from the information asymmetries inherent in valuing intangible assets. Drawing from established marketing and finance literature theory and methods, in this paper we provide evidence regarding how equity markets perceive brand acquisition strategies, and whether these strategies reduce the acquirers’ perceived risk relative to a control sample of firms. Our results suggest that shareholders view brand acquisitions, unlike other intangible asset acquisitions, as fairly valued. Yet, the market appears to value brand acquisitions differently based on the brand’s characteristics, which also affect performance after acquisition. Furthermore, we document a decline in systematic risk following brand acquisitions.

Keywords: brand valuation; brand equity; merger & acquisition; brand acquisitions; firm performance (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (3)

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DOI: 10.1057/s41262-016-0006-4

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