Consider the unusual legal structures of the following four deals: When Google went public in 2004, it used an Internet auction to sell its stock to shareholders. When Ben & Jerry's went public in 1984, it sold its stock only to Vermont residents. Steve Jobs's contract with Apple entitles him to an annual cash salary of exactly one dollar. Stanley Works, a Connecticut toolmaker, considered reincorporating in Bermuda to reduce its tax liability. Under public pressure, it changed its mind and remains legally incorporated in Connecticut. What do these deals have in common? In each case, the legal infrastructure of the deal had a branding effect: the design of the deal altered the brand image of the company. The structure of each of the first three deals is difficult to understand using the traditional tools of corporate finance alone. The deals appear to be inefficient, at least if one thinks about efficiency in the usual way. But if one also considers the impact of the deal on brand image, the Google, Ben & Jerry's, and Apple deals are success stories. The Stanley Works deal was a failure. But it did not fail because of some flaw in its financial design, such as a miscalculation of the tax savings or difficulty in communicating the tax benefits to its shareholders. The deal failed because its managers failed to predict the negative impact that its legal infrastructure would have on its brand image.
Brand New Deal: The Branding Effect of Corporate Deal Structures,
Mich. L. Rev.
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