What does an acquisition mean for the reputation of the buyer? The seller?

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By Linda Forrest

When Microsoft announced that it had acquired Skype for the tidy sum of $8.5B US, the tech world positively buzzed with questions. (As an aside, the acquisition means good things for all Canadians as the Canada Pension Investment Board is looking at a 3x return on the investment it made in Skype less than two years ago! I just might get a pension yet!)

What would this acquisition mean from a functionality perspective? Was Microsoft, as ZDNet suggested, just trying to head off prospective buyers Google and Facebook? Did Microsoft wildly overpay, as TechCrunch says? Was this a strategic acquisition that will kill Skype so that Microsoft offerings that have similar functionality can dominate the market? Was this purchase, the largest in the company’s history, a good move financially for Microsoft? As the Financial Times asked, does the Skype acquisition provide the “glue” in Microsoft’s multimedia strategy? As Wired succinctly put it, “Microsoft buys Skype for $8.5B; why, exactly?” Does a boon in M&A mean a rebounding US economy?

Tongue in cheek Tweets abounded, such as this one that joked Announcement: “Skype to be renamed Microsoft Windows Live Hotmail MSN Video Chat Bing.” ITWorld Canada‘s Shane Schick was bemused when dial-in access to the press conference announcing the acquisition was not suggested as an opportunity for people to use the Skype platform.

The sheer speed with which the technology and financial media covered this acquisition in great detail brings to mind the prepared obituaries of celebrities and dignitaries, though surely such advanced preparation was not possible in this case. I suspect many people were at their desks quite early yesterday.

The questions above represent just the tip of the iceberg and better and more informed tech pundits than myself explore these issues and more in great detail elsewhere. What I’d like to examine, using this acquisition as an example, is what an acquisition can mean for the reputation of the buyer and the seller in the media marketplace.

An acquisition means media coverage for the seller and the buyer

You would be hard pressed to find a media outlet that covers business or technology that hasn’t covered the Microsoft announcement, and rightly so. Any outlets that did not cover it would be outing themselves as out of touch with their markets.

While the sums and the players involved are household names, regardless of the stature of the companies involved, especially if one of them is publicly traded, and a proper announcement is made, there will be some ink spilled about the acquisition. It’s up to the purchaser as to how loudly they want to bang the drum about their purchase and then up to the media as to whether they think their readers will be interested in the news.

Whether the coverage is positive or negative is a key consideration: if analysts and reporters posit that the purchase was a bonehead move, waste of money, ill fit, and so on, and your company doesn’t already have a strong reputation in the market and regular coverage in influential publications, this may well be the first time your prospects have heard of your company. To do so in a negative context could hurt your brand. It’s arguable that some strategic acquisitions are done in order to improve the brand of the purchaser, hoping to latch onto the positive reputation of the company they’re buying. How does the media respond?

If the company being acquired has a better reputation, it will receive more media attention than the purchaser

Can you buy hip? Can the purchase of a cooler company make your brand cool and elevate you to media darling? Maybe. There’s no surefire example that comes to mind for me of where this has been the case but I’d love to hear from you in the comments if you’ve got any examples to share.

More often, the hip company gets absorbed into the branding and existing reputation of the purchaser, leaving little to no trace of their standalone cache. If an acquired company maintains its own branding, there’s more potential for it to ride the wave it was on prior to being bought.

Some big companies try to buy their way out of their bad reputations, or change up the leadership of the company in the hopes of erasing the foibles or failings of their predecessor. Now, more than ever, the media – citizen-run and otherwise – takes not of every single move. MarketingProfs has an article today about rising about a bad reputation.

In the Microsoft and Skype example, there are benefits on each side from a media perspective. Skype, the relatively new kid on the block, has had a spotty past with its platform, only a very small percentage of which actually pay to use their offering. Media have marvelled at the technology, but also bashed the company because of outages, unreliability and inflated sense of self. But, Skype has enjoyed significant traction with the media – both good and bad. The joining of the two companies enables some cool technological advancements in the realms of videogaming, so both brands will enjoy mileage in media that covers that space. Financiers will watch with great interest how Microsoft gets a return on its investment. As integrations between the Skype platform and Microsoft’s properties roll out, there will be coverage galore across the media landscape. A rising tide lifts all boats, as they say.

If the buyer has a better reputation, it will receive more media attention than the seller

Let’s be honest, in most cases, the bigger fish eat the smaller fish. It’s the bigger organizations that have the money to purchase other companies to expand their footprint, break into new geographies or sectoral markets, integrate their offering with those that are encroaching on their territory, or any other number of strategic objectives. These companies also have the marketing investment to manage their reputation in the media, aggressively pursue the right media opportunities, provide media training for their top executives, teams of PR and IR resources to both respond to inbound inquiries and manage outbound news. As such, the purchasers typically have more thud factor when it comes to their media presence. That said, some companies that behave in a Pac Man fashion, gobbling up multiple companies with little apparent concern for their long term strategic objectives, become known as such in the media. Yes, AOL, I’m looking your way.

In the Microsoft and Skype example, it depends on who you talk to about the companies as to whether one has a better reputation than the other. Both have been plagued by intermittently working applications, customer outrage, criticisms of their leaders… Such criticism comes with the territory of being a company in the public eye, especially ones of these proportions. Those more on the techie side of things would likely say that Skype has the better reputation, where others would argue the virtues of Microsoft. Points can be made on both sides. Perhaps it’s best chalked up to the mood swings of the media and the disparate sentiments of particular outlets, biased towards one company over another.

What’s your take? Is this acquisition going to be portrayed more positively or negatively in the media overall?

Image: Getty Images c/o MSNBC

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