Brand identity is seen as ever more critical by those within the private equity industry, according to research from BackBay Communications, a strategic financial services branding, marketing and public relations firm, and PitchBook, an independent research firm providing data and analysis to the private equity industry.
The study, Private Equity Brand Equity II, surveyed 256 private equity professionals, limited partners, investment bankers, intermediaries, lawyers and consultants serving the private equity industry in the US and Europe concerning their attitude and approach to branding. The study found that 99% of those questioned viewed a private equity firm’s brand as directly linked to a firm’s success. When questioned in 2009 in a previous BackBay study, 93% of the same audience held that view.
“The private equity market has changed significantly in the last three years,” says Bill Haynes, president, BackBay Communications. “With more private equity firms in the market raising funds and with increased competition for investments, firms are clearly recognising that brand identity is ever more critical for fundraising, deal-flow and securing the best talent. As limited partners re-assess their allocations and new investors enter the market for the first time, it’s those firms with positive, stand-out brand identities that will be most attractive.”
“The industry has evolved,” says Graham Hearns, director of marketing and communications at The Riverside Company, “from a model solely based on deal doing to one where a strong brand is absolutely essential.”
A growing recognition of the value of brand is being reflected in the budgets of private equity firms and others working within the industry. Over half (52%) of those questioned said they had increased their investment in marketing materials, including their website, in the preceding 12 months. Some 26% had increased their investment in public relations and 37% in investor relations in the same period. In the next 12 months, this is set to increase further, with 54% planning to invest more in their marketing materials and website, 53% to invest more in investor relations, and 41% to invest more in public relations.
Limited partners and target portfolio companies are unsurprisingly considered the most important audiences for firms when developing a strong brand. According to the survey, the key audiences for a strong brand are:
Limited Partners (78%)
CEOs of target companies (68%)
Investment bankers (62%)
Lenders (50%)
Current and potential employees (40%)
The media (19%)
According to survey respondents, the most effective ways to build a strong brand are:
Achieving strong portfolio company returns (71%)
Having investment discipline (47%)
Building a cohesive firm culture (45%)
Avoiding major portfolio company blow-ups (34%)
“With one of three firms currently in the market raising a fund, return on investments are of course fundamental to how a firm is regarded,” says Toby Mitchenall, London-based director of BackBay Communications. “However, a positive culture, reflected in a firm’s brand, is important too as LPs and vendors alike become increasingly discerning.”
Engagement with social media still appears to be a sticking point for many firms – only 7% of those questioned claim to regularly make use of the likes of Twitter, Facebook, LinkedIn or YouTube to enhance their brand. Notably, while 19% of those questioned simply don’t see any value in it, 20% feel it goes against their company’s culture.
Despite some reluctance, though, it would seem that greater use of social media by private equity firms remains likely. Nearly one third (30%) of those questioned said that while they did not use social media currently they would like to in the future.
The sentiments of Christopher W Ullman, Director of Global Communications, The Carlyle Group, are perhaps typical of those in this bracket: “Many young people don’t necessarily get the newspaper every morning and read it the way people in their 40s and 50s do. They get their information in a variety of ways and we are figuring out how to tap into those vehicles.”
“There is of course no single ideal formula for those looking to enhance their brand,” says Haynes. “However, in a highly competitive market, it is valuable for PE firms to differentiate themselves, and they should consider polishing and projecting their brands in ways that are consistent with their firm culture.”
