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Strong Brands or Trademarks and Product Quality Often Lead to Mergers and Acquisitions!

 

The more well-known a particular brand or trademark, the more likely it will be a good basis for a merger or acquisition.  A well-known brand or trademark along with good product quality leads to customer loyalty.  Generally, this well-known trademark or brand will also be the basis for repeat sales, new sales and a percentage of the market in a particular industry.  An illustration of how a well-known brand leads to an acquisition can be found in Samsung’s purchase of Harman International Industries Inc. for $8 billion dollars.   

Samsung bought Harman to enter the auto industry and provide a variety of products related to internet and automated vehicles.  Samsung will be able to leverage Harman’s recognition of its brands and high quality of products for the auto industry for new products Samsung is developing.  Samsung will have the JBL, Infinity, Harman Kardon, and Bang & Olufsen brands to test out its new products for the auto industry.  These well-known trademarks and the high quality of Harman’s products led to Samsung’s offer to buy Harman for a price of $112 per share.  This was about twenty eight percent higher than the market price for Harman at the time of the offer.  

Samsung’s ability to establish post-acquisition synergies and maintain product quality will determine the success of the venture.  However, there is no doubt that having a good well recognized trademark portfolio led to a premium and a nice pay day for Harman’s shareholders.   Harman’s focus on technologies that are related to navigation, entertainment, security and analytics tools instead of automobile manufacturing is also a good natural synergy for Samsung.  Samsung does not have too many products for manufacturing cars, but it has many products relating to navigation, entertainment, security and analytics tools.  

Samsung should be able to take these products and integrate them into Harman’s products for the automotive industry.  Harman’s brands or well-known trademarks, product quality and focus on navigation, entertainment, security and analytics tools led the way to an acquisition that should pay high dividends for Samsung in the future.   

 

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