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Branding for Private Equity Firms

In the past Private Equity firms had the option of worrying about their brand or not. Communication took place in an organic way through partner networks and personal connections. Results produced by the Private Equity firm could stand on their own, demonstrating the value and strength of a firm.

Today this is slowly fading away. A Private Equity firm is now virtually required to participate in building and growing it’s brand. From the Name, Logo and Colors to the Voice of the firm and what sets it apart, all of these things are becoming more and more important to potential investors and business targets (not to mention consumers who voice their opinions about firms).

Listed here are some specific reasons that Private Equity Firms should care about Branding:

An increase in competition: There are more firms out there now due to growth in popularity of Private Equity. This is making it imperative to stand out and communicate efficiently an ever-increasing number of firms in the US and Globally.

A maturing market: When it first began, Private Equity was new and sexy, but now that initial luster is over everyone is back to business. Investors were extremely eager to give their money over to firms in the early days, but now they are looking to invest with solid brands that ensure them with trust and performance.

Defining the offering: Private Equity as a term has been blurred for many investors and individuals. When so many things come to mind while speaking about private equity it is extremely important to define what it is a firm actually does, specializes in or does not do. The constituents and prospects need that clear distinction.

An increase in publicly documented commentary: In the past Private Equity firms did not need to worry about public scrutiny or even journalist comments. No one seemed to have anything bad to say. Then the media began to demonize practices within the industry and the public joined in. Social media has amplified the ability for investors, consumers, journalists and more to voice their opinions about firms or specific transactions. It is important to be there to control the message.

Regulatory changes: Recent regulatory changes in regard to general solicitation and advertising (the JOBS Act) has essentially told firms to start marketing & advertising and strengthen their brands. If one firm does not work on positioning themselves one way, it is most assuredly that their competitors are out their doing it.

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Numbers make the difference – Time to Money or Right Decision?

PE wants to see as many deals as they can handle but they need to have the right size firm from an overhead and expenses perspective to make it work. If a middle market, or lower-middle market firm is trying to take a look at 1,000+ deals a year, maybe they seriously consider 100 of those. Then 10 out of those 100 deals might go through in a year. That’s an extraordinary amount of effort and manpower to look at this number of deals, and they don’t have much time to do it. So PE always has to make a quick decision and that problem is not likely to change.

How are private equity firms using due diligence to gain an advantage over their competitors?

PE firms are trying to obtain more customer insights on the target, whereas before maybe they’d do that themselves after they closed the deal or right at the end of the process. Now, they want market research to conduct more customer interviewing just to see how the company they’re trying to buy is positioned with their customer base and versus competition. Obviously, this type of work needs to be done in a careful and thoughtful way, because in the vast majority of cases the acquisition process is not known by customers and sensitivities at the company and PE firm are at a heightened level.

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Additional Resources:

Bain & Company Global Private Equity Report           2020 Global Private Equity Outlook

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