Blogs & Comment

Branson: How to swallow a company

Focus on culture.

(Photo: David Malan/Getty Images)

(Photo: David Malan/Getty Images)

The Virgin Group has launched (or merged with) hundreds of companies over the years, and our team has become fairly practised at the process of folding new companies into our brand. This used to be a concern mostly for established companies, but with the growth in information technology, I’ve been increasingly getting questions on this topic from new entrepreneurs, as startups explore combining their products and services with those of established companies, or even other startups.

Recently, I travelled to the northeast of Britain to celebrate the one-year anniversary of Virgin Money’s entering the banking sector there. It was amazing to see how much had changed over the course of 12 months. When we bought Northern Rock and began the process of rebranding the bank, this industry in Britain was on its knees in the aftermath of the financial crisis—consumers had little confidence in our most storied institutions. It was beginning to have an effect on the employees, who had been doing their best in very difficult conditions.

Transforming a corporate culture is difficult under any circumstances, but when a team has been working together for a long time, they already have set ways of getting the job done. And possibly more than any other sector—with good reason—banking is controlled by many strict rules and regulations. So there were concerns inside and outside the company that we’d have a difficult time introducing Virgin culture at the former Northern Rock branches.

We knew from experience that you should never underestimate the importance of your actions during the early stages. The period of restructuring (and sometimes mild chaos), when almost everyone in the company has to improvise new ways of working together, offers many opportunities for change—and mistakes. Staff and customers need to be treated with respect, the new business needs to be rebuilt with a purpose that fits your brand (beyond just financial gain), and you need to get the word out that the business now stands for something different. Once this period is over, it can be incredibly difficult to reverse employees’ established working practices and their overall outlook.

We took a gradual approach, changing the branches into Virgin Money stores and lounges one by one, transforming the architecture of each space. At these branches, members of the public can relax, grab a coffee, read the news and—if they wish—do some online banking. Once the physical changes were in place, it was easier for the staff to visualize how the business would work on an everyday basis. Then we began the next phase, including such changes as helping to provide support for young entrepreneurs and encouraging people in the community to use our space productively.

These days, when you walk into the reception areas you can sense that something special is going on. There’s a real buzz, and it extends through the staff’s working culture. Virgin isn’t alone in this approach of using its corporate culture as a tool when integrating new acquisitions. The groundbreaking tech companies Google and Twitter both have cultures of empowering great employees to achieve. It’s not a coincidence that companies with reputations for treating employees well are the most successful at mergers of this kind.

Once you have the right business culture embedded, it can be a delight to watch it spread. This was our experience at Virgin Media, when the CEO Neil Berkett and his team took two rundown cable networks and managed to turn them around. This industry was unknown territory for the Virgin Group, but the power of the brand and everything it stands for guided us well.

If you are trying to judge whether to merge with or acquire another company, it’s important not to get carried away by hopes about projected earnings, but instead to consider how that company’s brand and purpose fits with yours. A great corporate culture is crucial to success in the long term: Does this deal set up both your companies to continue building one together?

Richard Branson is a philanthropist, adventurer, entrepreneur and founder of the Virgin Group of companies