MenuBalancing a company’s worth
February 24, 2015
Marking its first week as a new public company, Walgreens Boots Alliance rang the opening bell at the Nasdaq Stock Market on January 9, as well as launching its new brand identity.
Walgreens Boots Alliance brings together Walgreens and Alliance Boots with over 370,000 employees in more that 25 countries. The company claims it is the world’s largest pharmaceutical wholesale and distribution network, its 340 distribution centres delivering to more than 180,000 pharmacies, physicians, hospitals and other health centres. It is also, it claims, the world’s largest purchaser of prescription drugs.
Among its operating brands are Walgreens, Duane Reade, Boots and Alliance Healthcare.
Its name is obviously drawn from its two pre-merger monikers. They have simply changed the order so that it holds together better (Walgreens Alliance Boots is more awkward that Walgreens Boots Alliance), relegating Alliance to more of a descriptor than a proper name.
While it is still a mouthful, one understands the reasoning behind retaining these names. They all have, one can easily assume, a lot of brand equity that was too valuable to throw away. This strategy is not a novel one; many companies have taken the same approach. Ameriprise Financial just announced on January 12 that its subsidiaries, Columbia Management and UK-based Threadneedle Investments, will come together under the name Columbia Threadneedle Investments. Over 15 years ago the merger of accounting firms Coopers Lybrand and Price Waterhouse resulted in the firm being called PricewaterhouseCoopers.
Not all companies follow that example. The controversial acquisition of the Tim Hortons coffee and doughnut chain by Burger King has resulted in a parent company called Restaurant Brands International (both brands will continue to operate under their existing names). adidas Group’s portfolio of brands includes Reebok, Rockport and TaylorMade, in addition to, of course, adidas.
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Some, if not most, of these naming decisions were probably political decisions aimed at assuaging one of several constituencies. “We don’t want to offend…” was probably the defining motive in these decisions. With Walgreen’s acquisition of Boots and Alliance, the only benefit to have all three names in the corporate name was to mask that this was really an acquisition.
When The Wendy’s Company bought Tim Hortons several years ago, they did not change their corporate name (Wendy’s subsequently spun it off a few years later). With the political storm created by Burger King’s acquisition and move of the corporate head office to Canada, the thought was probably not to potentially stir up Canadian public opinion by stating the obvious: Tim Hortons is now owned by Burger King (Americans were sufficiently angered by the move north).
These decisions are all understandable but in the final analysis, they are short sighted. It dilutes the corporate name and, one would guess, weakens the strength of the company’s value on the stock market. As much as financial analysts, stock market gurus and others will all claim their opinions of companies are solely based on a company’s balance sheet, which company would be worth more on the stock exchange: Cupertino Consolidated Technologies International or Apple?
Thought so.
