The Significance Of A Company’s Name!

 

How much does a company’s name say about them? Why is it so important to get the name of a company right?

What’s in a name?

A company’s name isn’t just the grouping of several letters of the alphabet to represent the identification of an entity.

It’s much more than that. If you are in business, the name of your company probably represents one of your most intangible assets. It’s what we call “brand equity”.

 

Why do companies change names?

Renaming normally indicates a brand new start by the entity – “Out with the old, in with the new”.

Some reasons for a company to change name include:

1)    Bankruptcy

2)    Negative brand equity

 

But in this day and age, this almost never works; everyone would know your history at just the click of a button. Which is a perfect segue to my next point which is – not all reasons have a negative connotation to them.

Some changes are for the best, for example before Google Inc (NASDAQ: GOOGL) came into play, Larry Page and Sergey Brin named their search engine “BackRub”. Only in 1997 did they rebrand it as Google, a play on the word ‘googol’, a mathematical term for the numeral 1 followed by 100 zeros. Imagine if they kept the original name, a common phrase now might be, “let’s BackRub that!” LOL

The following are some other rationales behind why companies do change names:

 

1)    Mergers and acquisitions:

CapitaLand Limited (SGX: C31) was the result of a merger between DBS Land and Pidemco Land. Another local example would be ComfortDelGro Corporation Limited (SGX: C52) which was formed from a merger between Comfort Group and Delgro Corp

 

2)    Product became more well-known than the company:

In 2013, Research in Motion was renamed as Blackberry Ltd (Nasdaq:BBRY) (But it didn’t help that the company was also going through a rather rough patch at that period in time)

 

3)    Shortening for marketing purposes:

LG with their “Life’s Good” tagline was previously called Lucky and Goldstar in South Korea

 

4)    Change in core operations:

In Nov 2013, Freight Links Express was renamed as Vibrant Group Limited (SGX: F01) to better reflect the Group’s new core business activities after the inclusion of the financial services business and real estate business as part of its core operations
 

Value In Action

By itself, renaming should be considered a neutral exercise and the rationales behind such a move should be assessed on a case-to-case basis.

Although the extrinsic cost is minimal, its repercussions may be infinite and can go in both directions. Thus, one has to analyse the underlying fundamentals and intentions behind this significant corporate exercise.

At least we aren’t “backrubbing” for anything, it just sounds funny LOL

 

Join us on Facebook for more exciting updates and discussion about value investing. Submit your email address for important market updates and FREE case studies!

Download The Workshop Resources &
Stay Up to date with the stock market with our Newsletter!
Enter Your Email address here:

Leave this field empty if you're human:

We will only provide you with information relevant to value investing. You can unsubscribe at any time. Your contact details will be safeguarded.The information provided is for general information purposes only and is not intended to be any investment or financial advice.

All views and opinions articulated in the article were expressed in Mun Hong’s personal capacity and do not in any way represent those of his employer and other related entities. Mun Hong does not own any shares in the companies mentioned above.

There is no ads to display, Please add some