What's in a name change?
Would Apple or Sara Lee, by any other name, smell as sweet to investors? Many experts believe that a company name gives off a whiff of success or failure, depending on the values of the age and the way the corporation's whole identity is perceived.
Although mergers and acquisitions are behind most corporate rechristenings, a publicly-traded company sometimes takes a new name if the old one is hard to pronounce, to understand, or to feel warm and fuzzy about. Last November, K-III Communications renamed itself Primedia because K-III 'sounded like a holding company when we're a fully-fledged media company,' says Warren Bimblick, vice president of IR. K-III was 'hard to say and hard to spell,' continues Bimblick. 'People said 'K, one, one, one,' and one person got rid of the dash and said Kill.' (It's actually 'Kay three'.)
IROs aren't responsible for renaming companies, but they do play a central role in justifying such changes to the financial community. One advantage of having a dreadful moniker - K-III was used for a legal filing and the name inexplicably stuck - is that no-one's sorry when it's gone. 'We made little jokes about how much we'd have to put into the kitty if we accidentally said 'K-III' in conversation,' remembers Bimblick. 'But it was easy. K-III is a name that people were happy to get rid of.'
Some names go from good to bad overnight, after a corporate mishap becomes indelibly engraved on the collective memory. Last year, ValuJet, three syllables that conjure images of the plane crash in the Florida Everglades that saw passengers who survived being eaten by alligators, merged with Airways Corporation and was reborn as AirTran Airlines. 'In that case, the name had gotten so tarnished that no-one was going to fly on ValuJet again,' maintains James Bell, senior partner at Lippincott & Margulies in New York.
Out with the old is easy when an appellation is creating problems or confusion, but no IRO would want the headaches and expense of changing names on a mere whim. 'The first choice is clearly not to have to change your name,' says Bimblick. 'You don't do it lightly. You make sure there's really some value in it.'
What's in a name?
More companies are changing names today than ever before. In the first half of 1998, 955 publicly-listed American corporations took new names, according to identity consultant Anspach Grossman Enterprise. Although most changes were prompted by M&A or divestitures, many companies took the plunge out of a desire to reposition themselves. For instance, F W Woolworth became the Venator Group, CPC International reverted to Bestfoods, and Zapata Corp shortened its name to Zap Corp to mark its transition from an oil company to the high-tech world.
Corporate naming is faddish, as Jeff Lapatine, executive vice president of naming and branding for Siegel & Gale, confirms. 'In the 1960s, an odd combination of letters was seemingly the way to go,' he notes. Nynex, Exxon, and Xerox remain as proof. Bell recalls that 'Xerox' was once considered a fanciful name that people couldn't pronounce. Now, 'xerox' has entered common parlance as a verb, and the company sounds as if it's been around forever.
Everyone's searching for 'meaning and stature,' says Lapatine. Family names - like Edison, Morgan, and Dell - were originally supposed to communicate a level of integrity. Today, however, Lapatine concedes that it's harder to find a person's name that you can hang your hat on. 'You have an era when companies don't belong to people. They belong to shareholders.'
A tangled history of acquisitions and spin-offs can leave an IRO struggling to explain a misleading name to investors. Finova Group in Phoenix, Arizona, was known as Greyhound Financial until 1995. Bell notes that the name of 'a bankrupt bus company' simply didn't cut it in financial services. 'People would call them for bus schedules,' recalls Bell, explaining that 'Finova' was chosen because it plays up the company's reputation for financial innovation.
At other times, internal changes render a once-meaningful name obsolete. In 1997, Arauco Resources became Kit Resources after a reverse takeover of a corporate shell. The original company took its name from the district in Chile where it was prospecting for gold. 'Arauco was difficult to pronounce,' recalls Kerry Knoll, IRO of the Toronto-based company. 'People would look at it and pronounce it three or four different ways.'
Now the company is developing a mine in the Kitikmeot region of Canada's Nunavut Territory. 'We didn't want to name it 'Kitikmeot' because that would be worse in terms of shareholders pronouncing it,' says Knoll. 'So we picked Kit.'
Corporate names can powerfully symbolize where a company's allegiances lie. Choosing Kit was a matter of pragmatism as well as pronunciation. 'Our mine is in a territory of Canada controlled by the Inuit people. We need their support to build the mine,' says Knoll. 'The name change showed that we wanted to be part of their area. It helped us at the community-support level.'
Global appeal
International companies search for syllables that travel well. The goal, Bell explains, is to find 'a global name that makes sense in Hindi without offending an Indonesian.'
When Novartis was formed in 1996 from the merger of Ciba-Geigy and Sandoz, the Swiss pharmaceutical giant was determined to forge a unique identity. Wolfgang Kirchmayr, head of IR and capital markets, says that the new entity, Novartis, is more than the sum of its constituent parts; it isn't simply 'half Ciba and half Sandoz.' Without a distinct culture, says Kirchmayr, 'There's a risk that people would say, We at Ciba do it this way, and We at Sandoz do it that way.'
Kirchmayr maintains that Novartis, which combines the Latin words 'novo' and 'artis,' meaning 'new skills,' has international appeal because the neologism isn't rooted in one modern language. 'In continental Europe, they had a natural understanding of the term,' explains Kirchmayr, who believes that Latin names click with people who speak Romance languages. 'At the beginning, we got many questions from Anglo-Saxon countries. People in the UK and US asked, What does Novartis mean? What does it stand for?'
Right now, dead languages are in vogue. Peter Gilson, managing director of Siegel & Gale's London office, says that European companies are embracing Latin-based names - which 'adds a pseudo-legitimacy to the name' - and words that end in vowels, which are easy to pronounce in most languages. He cites Diageo - the company formed by the 1997 merger between Guinness and Grand Metropolitan - as illustrative of both trends.
Diageo is loosely based on the Latin word for 'day' and the Greek word for 'world,' explains Luke Swanson, spokesperson for the London-based consumer goods company. The name implies that the company's products - from Pillsbury biscuits to Burger King French fries - are enjoyed 'by consumers every day, all around the world.'
Before signing off on Diageo, managers consulted with linguists and market-tested the concept on consumers and shareholders. Lapatine says that he regularly uses idea-generating software, thesauruses, and Berlitz programs to explore the connotations of words before coining a company name.
Slim pickings
Finding a name that's unique enough to be successfully trademarked is another hurdle. Bell notes that 100,000 products and company names are trademarked each year. Therefore, he says, 'If you try to grab a name from a dictionary, the chance is fairly low that it will work.'
Companies are hard pressed to be creative in such a crowded field. 'These days,' says Shannon Polk, investor relations manager for Cordant Technologies (formerly known as Thiokol), 'almost every name is taken so you have to keep coming up with new ones.' Polk explains that Cordant is a shortened form of 'concordant,' meaning 'harmonious;' the desired impression is that we're 'a good company to work for.' In addition, the change of name signals that Cordant has metamorphosed into a company with a wide range of aerospace and industrial products.
Persistence can win out when dealing with the gray areas in trademarking. Primedia wasn't an easy name to clear legally, according to Lapatine. Several small companies had used Primedia in one way or another,' he says. 'In this situation, K-III wanted Primedia so badly that they did everything possible to get it.' Later, the company went to bat to secure PRM as its stock symbol. 'PRM had been reserved for over a year,' says Bimblick, 'so we asked whether the reserve could be lifted and the answer was yes.'
To investor relations officers, bagging an appropriate and easily-retained stock symbol may be as important as finding a memorable corporate name. 'Sometimes,' points out Lapatine, 'the financial community is the community you're aiming for,' noting that analysts and investors typically refer to companies by their ticker letters. Knoll recalls that one reason why Kit Resources held so much appeal was that the stock symbol - KIT - was available.
Finally, the internet has further complicated corporate naming because companies must also find a corresponding web address for themselves. Slim pickings among internet addresses mean that companies with new names probably won't be able to snag the easiest-to-remember urls. For example, the obvious choice for Cordant - www.cordant.com - was taken, so the company settled for www.cordanttech.com, according to Polk.
Getting the message across
First and foremost, companies changing names want to avoid appearing flighty or capricious. 'It's our preference,' says Lapatine, 'to wrap a name change around an event, not just pull it out of a hat.' At Primedia, for example, the new appellation was announced as the last leg of a re-focusing initiative after the divestiture of non-core businesses was completed, says Bimblick.
Primedia revealed its name change at an analyst meeting; it then issued a press release, sent out proxies so shareholders could vote on the name, and set a date for a shareholder meeting where the votes would be tallied. 'It's a good communications opportunity,' says Bimblick. 'It allows you to send out a letter from the chairman saying what we're doing now.'
Internally, Primedia gave employee baseball caps bearing the new corporate logo. And to publicize its new ticker symbol, Seventeen magazine - one of Primedia's properties - held a fashion show outside the New York Stock Exchange.
Ultimately, name recognition may be a simple function of dollars spent. 'It really comes down to spending a lot of money to clean out the old,' according to Siegel & Gale's Gilson. He estimates that 'from trucks to letterhead' it costs around $3-4 mn for a successful corporate name change for a company of any real size. Primedia's rechristening cost over $1 mn, a sum Bimblick describes as 'modest.'
Novartis is widely regarded as a model of slick, successful naming. In the nine months wait for US Federal Trade Commission approval of the merger, the company prepared all the new logos and fonts. On the day approval finally came, Kirchmayr held a meeting with investors and 'during the meeting, they started to change the logo on the building and were nearly finished by the time the meeting was over.'
In a name change, the annual report poses special headaches because of its long shelf life. Kit's Knoll spent the months following the name change sending out annual reports that still said 'Arauco.' Were he to do it over again, Knoll says he would cover the old company name with a 'Kit Resources' sticker, rather than prolonging the confusion until the next annual report was due out.
Is it a success?
It isn't easy to tell when a new name has finally lodged in investors' psyches. Polk, who's still coping with her company's May name change to Cordant, admits, 'We all sort of catch ourselves sometimes saying Thiokol.' Time, alone, seems to help. 'When people stopped phoning and saying, Isn't this Arauco? we figured we'd gotten the message across,' recalls Knoll.
How does a company know whether changing names was the right decision in the first place? Most experts say that the success of a company and the success of a name are inextricable. In other words, few people would seriously argue that a name alone - no matter how inspired or catchy - can make or break a company. Names matter, but their reputations usually rest on how the company's products and strategies are perceived by shareholders and by customers.
'Perceptions are driven by the organization,' maintains Bell. 'If you like Citibank or McDonald's, it doesn't have to do with the name but with whether the ATM ate your card or whether your burger was undercooked.' In the final analysis, a name is only a convenient shorthand for all the impressions - good, bad, or indifferent - that a company makes on customers and the financial community. 'After all,' says Bell, 'a name is just a handle.'