M&A Insider: How Johnson & Johnson Makes Big-Little Mergers Work


series - Johnson & Johnson M&A panel with Michael Sneed and Michael Marquis

Companies make promises, and customers form expectations. This is branding in its most elemental form, and the world’s premier enterprises understand it’s where growth begins. Mergers and acquisitions—the subject of Interbrand’s recent CMO Thought Leadership Breakfast Series at the New York Stock Exchange—often reveal new, more relevant promises to the market, and create new sets of expectations through their experiences, products and services.

These ideas were explored in “The Role of Branding in M&As,” where executives from Johnson & Johnson and Vogue International shared insights around priorities, processes and people, and how these “three Ps” form the core of a successful M&A. (Further insights are catalogued and unpacked in the Building a Market-Ready M&A Brand handbook, which you can download here.)

Leah Brier, strategy director for Interbrand New York, explored the role of branding in mergers and acquisition in conversation with Michael Sneed, Worldwide Vice President, Global Corporate Affairs & Chief Communication Officer for Johnson & Johnson, and Mike Marquis, Global President for Vogue International, a B2B and B2C haircare company that J&J acquired in 2016. (The panel is seen above with Interbrand’s North America Chief Growth Officer, Hermann Behrens, on the far left.)

OGX shampoo line

Vogue International a Johnson & Johnson Company, as it was rebranded post-acquisition, is one of America’s leading manufacturers and distributors of salon-heritage hair care and other personal care products. For over 20 years, Vogue has represented a refreshing and innovative point of difference in a saturated hair care industry. Its branded products include the award-winning OGX and Maui Moisture collection of shampoos, conditioners and styling/treatment items, and the OGX Bath & Body Collection, Proganix collection of salon-inspired haircare and FX styling line. Its products are sold in over 38 countries, five continents and in over 78,000 stores and salons, with offices in UK, Australia and the United States.

While Johnson & Johnson is bringing its global experience in growing Vogue’s brands and markets, it’s also learning some new tricks. As Michael Sneed told the audience at the New York Stock Exchange, he has been impressed by Vogue’s savvy in the fields of social media and efficiency. “They’re showing us how to do business in the 21st century,” he said. “At J&J we talk about being a 130-year-old start-up, but it’s one thing to say it and another to demonstrate it. [Vogue] is teaching us a lot about how we should best work so as we grow we can remain relevant.” More from their conversation below:

Leah: Can you both give us an intro into your roles and what you do at Johnson & Johnson and at Vogue International?

Michael Snead / Johnson & JohnsonMichael Snead (right): My title is Worldwide VP Of Global Corporate Affairs and I’m also the Chief Communication Officer for Johnson & Johnson. What that basically means is that I’m responsible for the overall reputation of Johnson & Johnson. I handle all of our communications around the world, all of our corporate marketing and anything having to do with global community impact. I’m a J&J veteran, I’ve been at J&J for over 30 years. I’ve worked in 6 or 7 different companies, I’ve managed companies all over the world, and now I get to work at the enterprise level and sit on our management committee.

Michael Marquis / Vogue International / Johnson & JohnsonMike Marquis (left): I’m the global president of Vogue International. I’ve been part of Johnson & Johnson for 22 years, running businesses like Listerine, Band-Aid, Johnson’s Baby, Aveeno.

In the middle of 2016 with the acquisition of Vogue International, I took over on day one to be Global President of Vogue because it’s such a critical, important strategy for us. And so we’ve been on that journey for the last two years helping to run and grow this business.

Leah: Michael, could you talk about the history of M&A at Johnson & Johnson—what the playbook is like, the history of the Vogue International acquisition—to get things started?

Michael: Sure, let me just give you some perspective on Johnson & Johnson as a whole. So J&J is about $76 billion in sales. We are the largest healthcare company in the world. We cover three big sectors of healthcare: consumer healthcare (which we’re going to talk a lot more about) and also our pharmaceutical side and then our medical device side.

Mergers and acquisitions are actually a very key and strategic part in how we continue to grow. About 50% of our growth over time comes from mergers and acquisitions. People know us for brands like Neutrogena and for Aveeno, but those are brands that we acquired years ago when they were tiny, and we’ve been able to grow them over time by utilizing some of the things that we’ll talk about later in terms of the things that we bring to any acquisition.

Over the last two years, we’ve spent about $40 billion in acquisitions. While some of those tend to be larger in nature, most of our acquisitions tend to be very small. In fact, the most successful acquisitions that we have tend to be small brands or technologies that we grow. In many ways, J&J is not unlike other companies, where the bigger the acquisition, the bigger the chances are that it’s going to fail, so we tend to actually shy away from big acquisitions. But we’re much more comfortable in doing acquisitions like Vogue International and some of our other ones where we can bring them in, and nourish them, nurture them, bring capabilities and then grow so they become the big brands that you all know and love. We feel very confident that Vogue and OGX will be one of those in the future.

Leah: So how did the acquisition come about? Mike, tell us a bit about where you came into the picture.

Mike: Sure, a lot of it comes back to what our strategies are overall. Carla Ruiz (Johnson & Johnson VP Business Development) is part of that strategy for us to win in beauty, which is a major segment of our consumer group. We saw an opportunity to build scale (for J&J) in haircare. We’re a very strong presence in skincare overall in beauty, but in the $70 billion haircare category we were sub-scale. As we looked at the Vogue business and its growth trajectory, we saw a company that was at the forefront of where consumer goods is going and in a category that was appealing to us. When we want something, we go after it pretty hard, and Carla brought it home. We were able to acquire the business, and it’s been a real fun start since day one.

Leah: Michael, prior to day one, what was some of the process that you went through—that you either worked together just on the Johnson & Johnson side or directly with Vogue—that really took that migration and made it work?

Michael: As Mike said, one of that things that we’re pretty good at is understanding what the needs are in the marketplace. So, one of the things that we always start with is, “What are the consumer needs, what are patient needs?” because that’s how we built the company. And “What are either insights we can bring, or capabilities or technologies, that would make an acquisition like Vogue actually create value for the organization?” So that’s obviously one of our key metrics. And so I think we’ve learned over the years, in order to do that, you need a team of dedicated people who can focus. We bring a cross-functional team of expertise across the business.

In the case of (acquiring) Vogue, one of the challenges when you’re a big company like J&J and Vogue is a proudly independent organization, it’s always “OK, what’s going to happen to me if I get swallowed up by this humongous corporate entity?” And so we spend a lot of time trying to figure out, “What does exactly happen on day one so that we actually retain the value that we acquired?”

Often times, the value is in the people and in the know-how and all of that, so how as a corporation do we make sure that we actually get those folks engaged and involved and on the same page when it comes to the values of the organization? Through a lot of trial and error and mistakes over the years, we’ve learned that’s more important than most people give credence to. There’s certainly a financial picture of course, you have to look at, but it’s as much about how are you blending those cultures and how are you ensuring that the human capital that we’re bringing in is going to be as motivated inside of Johnson & Johnson as they were on their own? So that’s really where the process starts.

Leah: Mike, when you came (over to Vogue) from Johnson & Johnson, how did you merge those cultures? Without having the experience of what the Vogue culture really was, what was your role in making sure that you were taking care of the people?

Mike: When you go through the process of M&A and when you get through to the transaction, a lot of your information was developed in management presentations and data rooms. And you have to then start again on day one, and when you’re actually inside the company. I love the intro around diagnosing the DNA of the company, because you have to get to what made it special, who are the people, who is driving the culture and almost re-diagnose what you’re trying to preserve. Because now as you’re inside and seeing the inner workings, it’s a little different than what you present in a board room.

What we talked about pretty quickly at Vogue was fallacies of an integration, “Let’s keep it separate and not touch it.” And the reality is, we don’t live in a stagnant world and the businesses are going to be evolving anyway. So we had to kind of decide that we’re going to create a new culture that was really in the blending of the two. The credo for Johnson & Johnson is going to be throughout all of our companies, that was going to be a big part of what was going to be the future of Vogue. But there were elements of how we came to market that we really needed to preserve, and that’s really where the integration work comes into in leading a business.

Get more: M&A — A People-First Approach to Success

Michael: To Mike’s point, in addition to the fact that there was market attractiveness around Vogue, Vogue had real capabilities that we didn’t really have or understand as much. So this notion of how do you operate in an increasingly super hyper-fast timed pace? How do you drive insights in a way that was perhaps a little bit more unconventional than we would have done for a big brand? And we knew they’ve got something that they can offer us. Often times, you think big companies know everything and you’re just swallowing up these entities. But in fact, we saw real capabilities that were lacking at Johnson & Johnson and I think that actually made it very attractive for us.

Mike: To tell one story from the early days, it had to be two, three weeks in (and) we’re launching a new brand, Maui Moisture, and the team comes in and shows an ad. You know here’s our new print ad, what do you think? I’m an old brand guy, so if you put something in front of me, I’m going to react to it. You make a couple comments here and there, you know, “We should do a few different things.” They say “Great and walk out. I go back to my meeting and about an hour later they come back in and they go, “Here it is, what do you think?” And I go, “How did you get that done so fast?” And they say, “We went back and we fixed it and we’re shipping it tomorrow so we’ve got to finish it today.”

The speed at which you’re used to getting those comments back to an agency and they write it in the notes, and you get a report and it comes back three weeks later, all the things that we’re used to growing up in old school branding, it kind of shocked our system into “This is the capability that we purchased. And as a leader, you better get on the bus and go as fast as these guys are going.” And we’ve really worked to maintain that.

Leah: So how is that being perceived on the Johnson & Johnson side? That speed, that capability, is it being adopted? Is it understood? Is there training that’s helping the bigger company learn from the new guys?

Michael: What I would say is, Vogue is certainly seen and perceived as one of the shining stars in J&J. Not because of its size, it’s still a pretty small business, so if you look at the numbers you go “Ah, how important can it be?” But what’s important is that it’s actually showing us how to do business in the 21st century. And we talk about J&J being this 132 year-old startup but it’s one thing to talk about it, you’ve actually got to demonstrate it.

Vogue is a way that we demonstrate and we often point to Vogue across our organization and say, “Hey take a look at what these men and women are doing. This is what we should be replicating in our business units in Pharma, in Medical Device and other parts of Consumer. They’re teaching us an awful lot about what we aspire to be going forward so that Johnson & Johnson, while we continue to grow, we can remain as relevant as possible for all of our new markets.

Mike: I think one of the things, in terms of the strategy of the integration, was having been at J&J a while, and knowing where we could improve, and being able to value the specialness of Vogue. The management team at J&J has been fantastic in terms of me being able to come back in and go, “This has to change, we can change this” and I feel a lot of open ears to making that change, versus sometimes if you kept something itself, it was just preserving that asset versus part of my objective is to really activate change across the enterprise.

Leah: With that change and all the exciting capabilities that Vogue has, taking a real brand lens to it, can you talk to us about the decision for the naming and the endorsement of “Vogue International a Johnson & Johnson company”? And any thoughts around the branding of OGX and if that is going to change at all?

Mike: To start with the brands—no, they won’t change at all. OGX, Maui Moisture, a lot of our great brands are loved by consumers. We’re (OGX) the fastest-growing haircare brand in the U.S. and gaining market share, and have successfully launched in Brazil and China and Southern Europe since the acquisition. Those are off to great starts, so there’s a real strength and power of this brand and that doesn’t look to change.

Calling the company “Vogue International a Johnson & Johnson Company” is an effort of making sure that we have some identity as a company to maintain some of that culture. And you know we quickly adopted the Johnson & Johnson company and elements of the credo into the ethos of our messaging pretty quickly, and it was very well received. Employees look at the value system that J&J brings and gravitate to it.

Leah: Michael, how much of that same philosophy is used in the mergers and acquisitions in J&J’s pharma and medical devices businesses?

Michael: We’re on a bit of a journey. Johnson & Johnson, as the brand J&J, certainly people know it but primarily through our consumer lens. We’re in the process of actually trying to open that aperture a bit so that people understand the totality of Johnson & Johnson and the fact that we’re all about changing the trajectory of health for humanity. It allows us to talk more directly about our pharmaceutical business and our medical device business, but to do it on our terms. By definition, those categories are probably more problematic to the average consumer in terms of their standing in the general population.

So companies like Vogue and all of our other companies have to spend a lot of time making sure that their job is to actually contribute to the overall value of the Johnson & Johnson brand and to not detract from it. That starts first and foremost with people understanding the values around the brand. It starts with our credo, our focus on the people we serve, and our employees and the communities, etc. But it’s tricky, and that’s part of my role and working with Mike and other leaders to make sure that we understand how the brands and the other brands attached to J&J, how they coexist in a way that provides incremental value to the enterprise as a whole.

Get more: Which Brands Go and Which Brands Grow in an M&A?

Leah: I’m curious to get your thoughts on some of the challenges you saw with the acquisition and the migration, either with Vogue International or with other acquisitions in the past, because it doesn’t always work and we know that it can very difficult on both sides of the table. So from an anecdotal perspective, I’d love to hear from both of you about what you’ve experienced.

Mike: Some of the challenge is connecting two very different-sized pipes, is the best way of describing it. When you talk to our customers around the world, they love brands like OGX and Maui, and they’re small and they’re growing very fast. But often they get frustrated because the supply chain infrastructure that they have quickly gets outstripped by their growth. Johnsons & Johnson brings a very sophisticated supply chain and structure to the table to help that. As I talk to our customers, they love the fact that we’re going to be getting the level and quality of service to them very quickly.

Plugging into the complexity of that global supply chain is a lot of hard work. And if you look at my calendar the last two years, you wouldn’t think that I was a branding guy, you’d think that I was a supply chain/master data/SAP guy because that ends up being what holds back your growth of some of these fast-growing brands. So that’s probably one of the biggest challenges, making that pivot through some of the infrastructure.

Michael: And then educating about the fact that at the end of the day, they are part of J&J now, and there are certain things that they could probably, I don’t want to say get away with, but that the scrutiny is not as intense when you’re separate than when you are part of Johnson & Johnson. I remember having many conversations with leaders of companies that were acquired and their heads would be spinning because they didn’t understand why we had such a focus on compliance, not that any company shouldn’t.

There’s just a level of scrutiny when you’re Johnson & Johnson where everybody expects J&J to be the gold standard and so it’s our job to educate our folks about why we have to live up to that. So that presents an additional burden, particularly if you’re a small organization like Vogue International. We’ve learned over the years, we’ve had real setbacks in some of our other acquisitions where they didn’t take (that) necessarily, and we paid the price in terms of either regulatory authorities or other government agencies not really giving us a break. Because once we bring a company into J&J, they have the expectation that that company will behave like any other J&J company. And we don’t get a “Oh, take your time”—no, it’s like you’ve got to be there day one. Getting that balance right, and making sure that employees understand that transition, is all part of the process over time.

Get more: Culture Eats Strategy: Feed Your M&A

Leah: How do you account for that complexity when you’re sitting and coming up with your transition plan and thinking about what it means for employees? What are some of the things that you’re taking into account and how are you planning for those in terms of time and in terms of KPIs for the acquisition as a whole?

Mike: It’s a fairly robust integration plan with the resources we deploy against it. I would say you kind of reinvent that integration plan every 30 days in the very beginning. You know, we had a lot of companies do 100 days to come back with a revised strategy and present a new strategic plan. But over the course of those 100 days, you kind of re-craft where your focus areas need to be. And you get the resources you need to go into the details of it. And some of it is very detailed work, and so I think the only piece of advice I would give is “Don’t get too wedded to that initial strategy or that initial deal model” because then you’re not listening to what is coming in and is going to make the most success.

Michael: That’s one of the biggest lessons we have learned. You do have to go in with a framework of your plan, but you also go in knowing it’s going to look pretty different 100 days in. I think sometimes, companies get waylaid, they become slaves to that deal model and then if you don’t adjust, you’re constantly behind the curve and then bad things start to happen from that. And that’s happened to us in the past.

We’ve learned that you go in knowing whatever plan you present, and it all looks perfect and the numbers look good, I can guarantee you it’s not going to look that way three months later. And so as long as management has that mindset that it is going to change, and that you’ve got to be willing to change with it, then that’s a positive thing. The ability to be flexible is critical to the long-term success of any of the acquisitions that we do.

Leah: It’s obviously easier to be flexible when you’re smaller, so it’s amazing that J&J does this so well because it is a huge company.

Michael: Yes, but haven’t done it well all the time, and we’ve learned and we do it with small deals and big deals. There are places where we probably have a lot more resident knowledge on how things might go, but in this day and age, markets change so quickly. And I do think that it’s been the mindset of management for us to understand, “Here is the broad framework” as well as the fact, whether it’s a Vogue or Actelion, which is our latest and biggest acquisition, we do these for the long term.

This isn’t about how do things look in a year or even two years. What are we playing for in the long-term? What are we playing for in terms of the health of our consumers? What are we playing for in terms of impacting the lives of our mothers and fathers? And that’s a long term play. So if something is off by a bit in the first 18 or 24 months, if that’s your line of sight, then yeah, you’re going to get panicky. But if you’re about the next 5, 10, 15, 20 years, then at the end of the day those things tend to work themselves out.

Leah: How much are the short-term goals shifting? As the migration plan shifts, what were some of the goals that you set out for the acquisition and migration, and how much did those shift in the first 90 days or 180 days?

Mike: You end up having a P&L and all that stuff that you’re going to meet, but I think that you filter a lot of the early decisions through our credo and through where you think those priorities are. And so as we held our customer service and the quality of our products first, and that’s really where we started seeing some of the big changes that we had to make and that ended up being a priority. In some cases, what that does is while you might have a cost goal of what your products are, you might set that cost goal —aside from saying that we need to service and get product on the shelf—and make sure it’s good quality, and address coming back and recouping that cost later.

So there are elements of the P&L that you end up making decisions against and ultimately, on Vogue in 2017, making sure that our customers feel confident in our product service and that Johnson & Johnson was not changing the ethos and the DNA of the business is paying off now with really strong marketshare growth and a great partnership with our customers. I think we made the right priorities but there are certainly elements of last year’s KPIs that we didn’t meet because we made other choices.

Get more: M&A: Consider Your Shareholders’ Stake

Leah: So how are you talking to customers? Prior to the acquisition, was there a look and discussion with customers about what this might do for the brand? How does it happen in other acquisitions? We know putting customers at the center is so important and something that Johnson & Johnson does incredibly well. I’d love to hear a bit about how the customer was brought into the decision.

Mike: I’m not sure they were brought into the decision prior to acquisition on Vogue, but we were quickly out talking to them. That was one of the special elements in the DNA of the business and that customer relationship that we were committed to maintaining. So we’ve maintained a Vogue salesforce, we have dedicated conversations with them around haircare globally. But it doesn’t take that first call, saying, “You know, nothing is going to change.” You have to prove it over the next year or two. So we’ve been very focused on maintaining that and it takes a while to build that trust so that people really feel that you are going to deliver against what you are saying.

Michael: On that one and with other fairly major acquisitions, I think that second call is to customers, because often times, as much as we can glean from our other discussions, customers have unique insights into dealing with their other customers and they can provide very valuable insight in terms of what they’re going to need from us as part of the acquisition—things to hold onto, things they would like to see embedded because of the capabilities that J&J has.

As Mike said, having that customer relationship, getting them involved early on, what’s good is that customers generally know how J&J operates, they know our systems, they know the capabilities. What they don’t want to have is they don’t want interruption to service. They want to make sure that their end users are going to find a seamless experience and that’s what we work hard to do. And again, everyone is different. But often times, that’s just set up on that maybe day 2—”How do you interact with our customers to make sure that they’re fully briefed and aware and supportive?”

Leah: What were some of the communications like at a more macro level to customers? Did they know about the change? Was that important for them to know?

Mike: They generally knew. For us, it was a pretty big, growing brand and they were aware of the goodness that for many our core customers we have those same relationships and trust across Johnson & Johnson with those executives. So this type of deal, where we are really building on to the scale that we already have in consumer goods, allows us to quickly talk and have those relationships with key customers and let them know what our plans are.

Leah: What has the Vogue acquisition opened in terms of new opportunity for mergers and acquisitions and spinoffs in the world of Johnson & Johnson? It is in a new category, it’s obviously performing extraordinarily well, it’s a fantastic portfolio of products. What does this open in terms of doors for the future?

Michael: It reinforces this notion that you’ve really got to be agnostic in terms of looking at innovation. With someone like J&J, obviously we have a huge R&D innovation engine, we spend a lot on technology per year on R&D. So you would expect our folks to be very proud of what they do. At the same time, as we continue to do M&A and they continue to be successful like a Vogue, it really forces us to make sure that we are agnostic in terms of where we look for innovation.

The fact that we can bring in a technology like Vogue and a business model that is quite different than frankly what we were doing, it reinforces that notion that we should be looking far and wide for things that can fit our strategies and not necessarily think that there is just one way to do it.

I think smart companies, while you can be very proud of how you built the business, and we are very proud, you should never be as arrogant as to think that that is the only way you can build it in the future. That’s when companies get into trouble. Companies like Vogue constantly remind us that there are a lot of different ways to grow, there are a lot of different ways to make sure that you can drive innovation. And if we’re taking those lessons and bringing them in and being serious about them, then that’s a good thing for J&J.

Mike: From the perspective of the companies themselves, I hope that it opens up the mindset that a small startup, a fast entrepreneurial company, can survive and thrive in a company like J&J. We hope to be the partner of choice for folks who are coming up because as they are making decisions about where they’ve put their blood, sweat and tears in creating this baby of theirs of a company, and how they hand it over and wanting to see it thrive, there are dollars and cents involved for sure, but there’s also a piece of making sure that their legacy continues. I hope that it continues to open up opportunities that we be the partner of choice to carry on that legacy.

Michael: One example of that, and we’ve seen it over the years, is I remember when I was working in our consumer business years and years ago, we had been talking with the president and owner of Neutrogena, an LA-based company. We spent 4, 5, 6 years talking to him about the Neutrogena business. And he was very much tied into it, did not want to let that go, and it took that personal development of that relationship that we were going to treat his business as well as he treated it himself.

At that time, Neutrogena was about a $100 million business for us and today, Neutrogena is well over a billion dollars. And I would say if you were to go out to LA where it’s still headquartered, you’d still get that family feel that Lloyd had developed when he was the owner of the business. So I think to Mike’s point, it is as much in doing it because we think it’s the right thing to do, but in to showcasing to other potential acquirers that we treat these brands and businesses incredibly well and that continues to make J&J a very attractive partner for them in the future.

Leah: I’m curious, if you could do anything differently from the start to now, or if you could think of what you want to do differently in the future, what are some things that leadership is talking about both on the Vogue side and the J&J side about what we’ve learned from this M&A experience?

Mike: That’s a good question. You know you have plenty of trip-ups as a leader at any point and you put your faults out there. One anecdotal story here: I think one of the key aspects of doing an integration is really transparent, frequent communication. We go out and communicate fairly often and for the most part, I think those communications are helpful. There was one in the early days where “the acronym wave” was hitting Vogue, so people just could not translate the Johnson & Johnson acronyms. I decided that it would be helpful, and somebody had actually put a Wiki out there on the J&J website of what our acronyms mean, and so I downloaded it and sent it out to everybody, but I did not scan through that document. The document was 16 pages long with acronyms and while helpful, it became an overwhelming joke within there that we ended up laughing about later.

But there are times where as you’re pacing different things that you’re integrating, I go back through the history and there are some that I probably would have delayed a little bit more and some that I probably would have advanced or moved quicker on. I think right now, that is all hindsight. Our results have been very strong but I think you look at some of those individual actions and think, “Oh goG, I wish I didn’t step on that landmine at that time.”

Leah: What’s the craziest acronym you remember?

Mike: Oh, I don’t know. I end up telling folks, I do feel in this seat that I speak two languages many times. I’m at Vogue and what’s amazing is that you sit with everybody co-located and you crank out great products and great communications on a global scale and everything is face to face and it’s a great thing. But I do fly to New Brunswick (J&J’s New Jersey HQ) and I talk the J&J language about how we’re doing versus the deal model and those type of things. I’d have to be in that mindset in the tower in New Brunswick to throw out all those acronyms.

Michael: I think, from our end, it’s how do we continue to replicate examples like Vogue more and more? Because for all the great work we think we do, for a lot of people J&J is still seen as a conservative, cautious company. And we want people to have the mindset of greater experimentation, of failing fast, which is part of what great entrepreneurial companies do, to be more of a learning organization. So I don’t think there is anything that we wish we had done differently, because Vogue has been very successful. The question is, “Can we start to replicate that in an even faster way across a broader swath of our business?” So that’s what we’re hoping to do in the future.

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