While mergers are often cause for celebration among shareholders, they can also be an opportunity for reflection and lesson-learning. And I'm thinking that may be the case for today's news that IconixBrand Group (NASDAQ:ICON) is buying out Mossimo (NASDAQ:MOSS) for $7.50 a share.

If you bought Mossimo stock at almost any point in the last two years, you're probably reasonably happy. If you bought on the spike up in 2002 and held on, you're not so pleased.

But that's not really the lesson I was aiming for today. What I'd prefer to explore is the risk and reward of investing in companies where most of the value resides in the name or design on the merchandise -- in other words, investing in brands.

At one point, at least where I grew up, Mossimo was sort of middle-class chic. Men's activewear retailed for price points around $20 to $40, while sportswear items went for between $20 to more than $100. The merchandise was seen as something of a peer to the likes of Tommy Hilfiger (NYSE:TOM), Calvin Klein, and Nautica. And while the brand was sold through department stores, stores like Dillard's (NYSE:DDS) were seen as somewhat middle to upper-middle class at that point.

Now Mossimo sells its goods through a licensing agreement with Target (NYSE:TGT). What's more, looking at Target's website, it's clear that the price points have fallen a fair bit from the glory days. In fact, the agreement with Target (brokered by Cherokee (NASDAQ:CHKE)) essentially rescued the company from the brink of near-bankruptcy.

What happened here is not that unusual. The company had a fresh approach that people liked and had significant success initially. But the company liked the taste of that success and so it tried to make the most of the popularity -- but in so doing it diluted the value of the brand and ultimately sealed its own fate. Once it felt like everybody did (or could) have Mossimo, nobody wanted it.

So what's the lesson? You certainly can build a lasting business with aspirational brands (like Tiffany (NYSE:TIF) or Coach (NYSE:COH)), but it's tough. And as often as not, it seems to take a very firm hand at the top -- one that's willing to forgo sales today -- to maintain the brand's cache and prestige tomorrow.

For more fashionable Foolishness:

Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares). While he certainly remembers the Ocean Pacific and Benetton crazes, he was always more of a Pacific Coast Highway kind of guy.