For many businesses, deciding to merge with another company is not necessarily about the immediate financial gains. Indeed, an acquisition has to make financial sense and must ultimately benefit shareholders, but oftentimes a change to a company’s brand can be just as important.
In a prior post, we explained how acquisitions based on changing or securing brand equity are not so easy. A purchase in that regard must make sense not only to executives, but to consumers as well.
Against that backdrop, it remains to be seen whether the merger between Marriott International and Starwood Resorts Worldwide will meet this criteria. The transaction, which was announced last month, will likely make the new hotel company the largest in the world with more than 5,500 properties across the globe and more than one million hotel rooms available
But the brand equity change is not ostensibly for families seeking vacation venues. Instead, Marriott wants to appeal to Starwood’s business travelers. Because of Starwood’s luxury properties and partnerships with credit card companies, business travelers are much more likely to be repeat customers. And with corporate clients being higher spend customers, it is no secret that Marriott would want to have a larger part of that business.
After all, Marriott has nearly double the number of loyalty members compared to Starwood, but with Starwood’s largely corporate members spending more than twice the amount of Marriott’s vacationers, there was more than $100 million difference in revenue in favor of Starwood.
If you have questions or need legal counsel on the potential effectiveness of strategic mergers, the attorneys at Shulman Bastian Friedman & Bui LLP can help.