The effect of brand acquisition and disposal on stock returns

Michael Wiles, Neil A. Morgan, Lopo L. Rego

Research output: Contribution to journalArticle

54 Citations (Scopus)

Abstract

Brand acquisitions and disposals are key strategic marketing decisions and often the largest single marketing investments that firms make. Yet little is known about the performance effects of such decisions. This study examines stock market reactions to brand acquisition and disposal announcements in 31 consumer industries. The results reveal that returns to such announcements depend crucially on three complementary firm assets-marketing capabilities, channel relationships, and brand portfolios-but that these effects may not be symmetric across brand acquisitions and disposals. Acquirer abnormal returns are greater for firms with strong marketing capabilities and those that buy brands with higher price/quality positioning than their existing portfolio. Investors also reward buyers that identify cost synergies in integrating new brand(s) into their portfolios but punish those that identify revenue synergies. Conversely, greater abnormal returns arise for sellers with inferior channel relationships and for those selling multiple brands, brands with relatively lower price/quality positioning than the seller's remaining portfolio, and brands unrelated to the rest of the seller's portfolio. The results from a paired subsample provide new knowledge about the positive net shareholder wealth created from brand acquisition-disposal transactions and indicate a strong role of marketing capabilities in creating this wealth.

Original languageEnglish (US)
Pages (from-to)38-58
Number of pages21
JournalJournal of Marketing
Volume76
Issue number1
DOIs
StatePublished - Jan 2012

Fingerprint

Disposal
Stock returns
Marketing capabilities
Seller
Channel relationships
Positioning
Abnormal returns
Synergy
Announcement
Shareholder wealth
Firm investment
Costs
Buyers
Industry
Assets
Brand portfolio
Wealth
Reward
Revenue
Marketing

Keywords

  • Brand acquisition
  • Brand disposal
  • Brand porfolio
  • Event study
  • Mergers and acquisitions

ASJC Scopus subject areas

  • Business and International Management
  • Economics and Econometrics
  • Marketing

Cite this

The effect of brand acquisition and disposal on stock returns. / Wiles, Michael; Morgan, Neil A.; Rego, Lopo L.

In: Journal of Marketing, Vol. 76, No. 1, 01.2012, p. 38-58.

Research output: Contribution to journalArticle

Wiles, Michael ; Morgan, Neil A. ; Rego, Lopo L. / The effect of brand acquisition and disposal on stock returns. In: Journal of Marketing. 2012 ; Vol. 76, No. 1. pp. 38-58.
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