Developing a strong private equity brand is essential for fundraising, deal sourcing and recruiting, according to a new study by financial services communications agency BackBay Communications and PitchBook, a capital markets financial data and software company.
According to the survey of 45 private equity firms, 70 per cent of respondents say having a strong brand is very important, and 30 per cent say it is somewhat important. Ninety-one percent say the need for a strong brand has increased over the last two years, driven by competition for deals (56 per cent), an increase in the number of private equity firms (19 per cent) and competition for fundraising (19 per cent). The goals of increased brand building are generating awareness among CEOs and management teams (50 per cent), limited partners (33 per cent), and investment bankers (11 per cent).
The firm attributes that contribute most to a strong brand are investment returns (79 per cent), management team (63 per cent) and clearly articulated firm positioning (53 per cent), followed by content that demonstrates a firm’s expertise (47 per cent) and firm culture (47 per cent).
To succeed in today’s competitive marketplace, 42 per cent of private equity firms are taking steps to increase their visibility, and 58 per cent are increasing their marketing budgets.
“There is consensus among private equity firms that building a strong brand is essential for deal sourcing, fundraising and recruiting, and it is encouraging to see private equity firms embrace the need for differentiated firm positioning and ongoing integrated communications programs that positions them as experts,” says Bill Haynes President & CEO, BackBay Communications. “Just as there is competition for new deals and limited partner funding, there is competition for mindshare among limited partners, investment bankers, business brokers and management teams, and forward-thinking private equity firms are making a commitment to clearly convey the reasons investors, advisors and companies should work with them.”
Strong investment returns (79 per cent), investment discipline (63 per cent) and building a cohesive firm culture (58 per cent) are the most effective means for private equity firms to build a strong brand. These attributes can be best leveraged through personal meetings (63 per cent), conference speaking (58 per cent) and marketing materials (47 per cent), media interviews (32 per cent), websites (37 per cent) and white papers that demonstrate a firm’s expertise (37 per cent).
In this competitive and dynamic market, 32 per cent of private equity firm respondents have changed their strategy in the last year, 16 per cent have experienced a crisis at their firm, and 21 per cent have experienced a portfolio company crisis. Many private equity firms have experienced difficulty with their media relations efforts, with 21 per cent failing to capitalize on their firm’s news, 16 per cent experiencing incorrect or misleading media coverage, and 11 per cent not answering media inquiries.
“It is essential for private equity firms today to have a professional approach to media relations – whether residing in-house or outsourced to an agency – to manage and protect their reputations and that of their portfolio companies, as well as to capitalize on positive news and demonstrate their expertise,” says Haynes.
Nearly one third (32 per cent) of private equity firms say social media is a necessary channel to distribute firm news and views. While 26 per cent say they are considering using social media in the future, 26 per cent don’t see social media as necessary for private equity.
“Private equity firm branding, marketing and public relations have become much more sophisticated over the last decade as private equity firms professionalize their operations,” says Garrett Black, Manager of Custom Research, PitchBook. “With private equity firms of all sizes needing to compete for dollars and deals, and with more team members spinning off to start their own firms, clearly articulating a firm’s positioning and then raising awareness through complementary tools and tactics in on an ongoing campaign is more important than ever.”
