RIP Smith Barney: What’s in a Name?

Ah, branding!  So it’s good-bye to Smith Barney.  Off to that eternal reunion with Harris Upham.

Lots of Wall Street’s legendary names have morphed into history.  Many from their own greed and hubris (Lehman, Salomon, Bear and Drexel come to mind).  But others – and Smith Barney joins this list this week – from an acquirer’s marketing decision.

Rebranding is a commonplace part of the post-merger integration process.  In this case, The Merger Verger agrees with Morgan Stanley.  The Smith Barney name may have been venerable one day but it holds sway today only in the hearts of a small group of graying brokers.

I have watched and at times worked for companies that have acquired strong brands.  Sometimes the names were dispensed with almost immediately.  Other times not.  In the case of HSBC, for example, they owned merchant bank Samuel Montagu, broker James Capel, commercial bank Midland, and several other highly-regarded names in the UK banking/securities industry.  And they kept those names long after their acquisitions. 

HSBC utterly failed to build any degree of cooperative synergies between the units and in fact left the door wide open for tiffs and snits and spats and all manner of productive maturity.

Then one day, HSBC awoke from the Battle of the Logos and – poof! – St. Andrew’s cross was the winner.  All HSBC all the time.  In an article written at the time of the change, the Independent of London observed, “visitors to the HSBC dealing floor will bear witness to a different business logo on virtually every pillar.”  That is an accurate statement, I am here to tell you.  It was a mess.

Conversely, some years ago, Graybar, then mostly an electrical equipment distributor, acquired Hansen & Yorke, a small but successful industrial supply company in the New York area.  The target was to be the launching pad for Graybar’s expansion into the industrial supply sector.  Immediately after closing, the Hansen & Yorke name was jettisoned and replaced with “Graybar Industrial.”  It was a death knell.  Buyers of industrial goods knew the H&Y name, one with 35 years of real customer goodwill.  Sure the Graybar brand had recognition but as a faceless giant, not a service-oriented family company.

You would be wrong to conclude that The Merger Verger views little companies as good and big companies as bad.  This is a question of marketing and customer expectations.  Key word: expectations. 

Disturb the longstanding equilibrium that a target has maintained with its customers at your peril.  Brands and names in particular symbolize – evidence – that equilibrium … for better or worse.

These are issues of brand reverence, in the HSBC case too much for the target’s brand; in the Graybar case too much for their own.  HSBC’s mistake was to let the old brands linger too long, let the culture of uncoordinated independence take root under the new ownership structure.  Graybar’s mistake was to disrespect the degree of customer goodwill that a little guy’s brand can represent.

When you boil a name change down to its purest essence, there are two constituencies that matter:

  • Customers
  • Employees

The Merger Verger does not see this issue as a chicken/egg problem.  I believe that the interests of the customer should carry the lion’s share of the weight in any name change discussion.  (I have no doubt that there were plenty of old-time brokers opining fervently against dropping the Smith Barney name but, believe me, they’ll get over it.)

For a small-to-medium sized business, the core question to address before making the decision to keep or change a brand is this:

  • Which brand can be best leveraged to pull the combined companies toward their long-term strategic goals?

I would ask that question in the immediate context and in the context of how the strategically expanded business should look two, five, ten years from now.  THINK CUSTOMERS.  If the change is appropriate within any of those horizons – even the very long one – I would either make the change now or set the path down for doing so over a known and finite period of time.

If that decision is made with objectivity and strategic vision, your next step is communication: sell the change, making clear what it stands for and how stakeholders will be better off for the combination charging forward under the new flag.

Oh, right: then deliver on what you’ve said.  Don’t forget that part.

Consider Graybar.  Obviously in the face of using a small acquisition to launch a new, potentially national business unit, the Hansen & Yorke name had to go.  They just did it too fast and communicated their intentions too little.  Don’t make those mistakes.

Personal Note:

Speaking of final good-byes, I said mine today to my long-dead father’s best friend, Chillie Callman.  I remember him fondly from my growing up years and again from my years back home as an adult. A good man gone but after a life lived fully and generously.  Thanks Chillie. RIP.


Laugh or Cry: Morgan Stanley’s Smith Barney Mouthful

Don’t you just love the story from this week’s Wall Street Journal about the Morgan Stanley gagging on Smith Barney? (Click here to read; registration or subscription may be required.)

Really, how can you not love Wall Street?  What industry generates more money by giving others management advice yet simply cannot manage itself? Merrill? Poof! Lehman? Poof! Drexel? Poof! Solly? Poof! Bear? Poof!

So The Merger Verger was not surprised to learn that Morgan Stanley is choking on its acquisition of Smith Barney.  According to the Journal article, the process of integrating back office IT systems was more complicated than expected!  How pathetic is that?

Do you know what “more complicated than expected” is code for?

“We didn’t do our homework very well beforehand.” That’s what it’s code for. More Wall Street bravado.

Word to the Wise:

When Wall Street comes calling with a great acquisition idea, if you remember nothing about that industry and its history remember this: They have no clue about the role that simple “picking and shoveling” plays in making an acquisition work, not as deal advisors, not as deal doers.  Their advice is about ideas (and fees), not about the practicum of making those ideas work.  Listen, they are smart guys with frequently good advice; you just have to figure out for yourself if following it can be made to work and if so how.

Fun Facts from History:

The illustration on the right is the “tombstone” ad from Ford’s IPO in 1956.  (Click on it for a larger image.) Of the 25 “major bracket” firms listed in the ad, only two remain alive and independent today. (Ironically, Morgan Stanley does not even appear on the list, suggesting that someone there had pissed Ford off in a major way.)

Recommended Reading:

One of the truly great books on Wall Street dates from 1940: Fred Schwed’s, “Where are the Customers’ Yachts?” It will make you laugh and cry!