The economic turmoil of the last few years has fundamentally changed the landscape of the private equity industry. Fundraising has become more difficult as institutional investors decrease their number of commitments to the asset class. In an environment where the best compete against the best, a strong, differentiated brand – a well-conceived, well-articulated firm narrative – is an essential part of long-term success.
But brands do not invent themselves. They are built through a concerted effort, guided by the desire to articulate and broadcast the firm’s identity into the marketplace in order to achieve the firm’s business goals. If brands are built correctly, they can achieve a momentum that drives a firm’s reputation through periods of growth and buoyancy, and sustains that reputation through periodic setbacks and downturns.
On one level, a brand can be words, graphics or a combination of the two. Yet it is the association the viewer makes as a result of these words and images – what we sometimes refer to as the ‘intellectual’ brand – that forms the foundation of the brand and how it works. This is particularly important in private equity, where brand-building efforts are meant to influence sophisticated audiences – limited partners, intermediaries and portfolio company CEOs.
HOW TO START BUILDING A BRAND
As the first challenge, a firm must identify the core attributes that make it unique. Is it the mix of product offerings; backgrounds of the team members, investment strategy and market opportunity; or sectors/ regions in which the fund deploys capital? The key messages are not drawn out overnight; rather, articulating what differentiates a firm from the competition is an involved, iterative and cooperative process. This is invaluable for partnerships, because it forces them to come to a consensus on key strategic issues.
An assessment of a firm’s market objectives is also vital. No communications programme operates in a vacuum. For brand building to be efficient and effective, it must be linked to clearly stated business goals. Communications efforts that try to be all things to all audiences will be expensive and run the risk of speaking directly to no one.
An important part of sculpting a brand is determining where in the market the brand is to be built. This is a matter of matching the firm’s investment focus, strengths and goals to relevant audiences and the communications outlets that cater to them. Private equity firms often focus their investment activities in certain industries. So in addition to the private equity trade and general financial press, certain industry trade publications are important from a brand-building perspective.
It is important to keep in mind that not all publicity is good publicity. Communicating a high-quality brand through public media often includes carefully weighing opportunities that present themselves or waiting patiently for the right opportunity to appear. The key is to evaluate the context of the article relative to the firm’s established communications strategy and business objectives.
Fine-tuning the brand is also a matter of self-control. Particularly with first-time funds and new firms, executives overestimate what is news. Getting a logo or hiring a new vice president is not necessarily newsworthy. Press releases should focus on significant events that have a material financial impact on the firm’s success, such as transactions, significant anchor investors or fund closings. Of course, the announcement of a new hire or promotion is important, but its importance should be weighed in relation to other news; if a new hire indicates a trend or change in strategic direction for the firm, then writing a press release is worthwhile.
LOOKING THE PART
The point of the logo is to capture creatively and visually the unique and differentiating qualities of the firm and its partnership. For instance, a private equity firm that conducts large corporate carve-outs might have a logo that conveys a sense of solidity, competence and establishment. On the other hand, an investor in media and entertainment deals might have a logo that displays a greater sense of creativity and style, and resonates on a ‘trendy’ level.
The process of developing the actual visual logo begins by conveying to a designer the qualities a firm wants to convey. The designer will then come back with a wide range of possibilities, each of which captures the desired theme in a slightly different way. The partnership will then react to these, noting their likes and dislikes. This process helps the designer narrow in on what fits the firm in terms of colour, shapes, font and look.
In addition to the logo, a wealth of other details, like supporting colours, templates and font sizes must also be ironed out and captured in what is called a ‘style guide’. This is a reference for the many ways of employing the firm’s visual brand; it leads to visual consistency within the firm and makes the job of the producers, designers, programmers and printers far easier.
Because the website is such a public communications device, many private equity firms create a general site that speaks to a broad spectrum of audiences. Increasingly, however, private equity firms are deciding to point their website at a defined audience, like entrepreneurs and business owners looking for an investment partner. As a result, websites catering to the lower end of the market are trending towards presenting the personality of the firm and its partners, to avoid just a dispassionate presentation of capabilities. At the other end of the market, firms that go public must incorporate an investor relations section to their website that is accessible by the public and meets relevant regulatory requirements.
THE IMPORTANCE OF BEING PITCH-PERFECT
It is during fundraising that the importance of brand building becomes particularly evident. Each investor meeting is a golden opportunity to communicate and underscore the brand. Every word, presentation slide and gesture is vitally important and cannot be wasted. As a result, all communications materials that are a part of this direct interaction – the pitchbook, private placement memorandum (PPM) and the presentation itself – must be well-thought-out, highly perfected and rehearsed.
The pitchbook is the cornerstone of a firm’s fundraising communications material.Getting it ready prior to fundraising is an invaluable exercise. This is message development at its core; it forces a self-evaluation and determines what is important, what differentiates the firm and illustrates where they will be in five years (see Figure
At its foundation, the pitchbook will answer the question, ‘Why invest?’ While each firm is different, all firms work with a similar set of building blocks – the market opportunity, investment strategy, and team and track record – which are ordered and placed together in the most compelling manner given a firm’s particular strengths and weaknesses. An established private equity firm with a strong track record can focus on the stability of the team and the repeatability of performance. A first-time fund might focus on the name recognition of the partners. A firm adding a new investment product in response to market conditions – distressed debt, for instance – will need to make a compelling case for the market opportunity.
It is also important to consider how one is being perceived through the eyes of institutional investors and massage key messages accordingly. Many large investment teams operate with a kind of ‘bucket’ system, where certain teams make decisions regarding certain types of funds. Particularly for funds with an esoteric or niche investment focus, presenting the fund in a way that corresponds with one of these buckets can be the difference between getting a meeting or not.
Presenters should resist the urge to design a deck that is a set of talking points or teleprompter for the presenter. A visual presentation is not being effectively leveraged if it looks like a bulletised version of a firm description written on a word processor.
The pitchbook has another role as well. It should serve as a powerful leave-behind document once the presentation is complete, capable of communicating to any reader who picks it up. As such, it must speak completely and totally in the absence of the presenter. Each page should communicate a key point to the reader; one should be able to pick a page up off the floor and still grasp its meaning.
The PPM is not just a legal document; it is also an important branding opportunity. A large portion of the PPM is dedicated to describing the firm and its differentiators and, as a result, there is no reason why a lawyer needs to write these descriptive parts of the document.
People are the best brand-building tools a private equity firm has. Perfecting the presentation of the brand takes time, particularly if it’s a team effort. Partners must become comfortable with the material and be able to present it in a colloquial manner. Arranging several sessions with a professional speaker coach is the optimum way to perfect this essential skill.
SUCCESS IS ABOUT EFFECT,NOT ACTIVITY
Someone once said, “Your brand is what people say when you leave the room.” This makes assessment very difficult. The first problem is the paucity of reliable metrics. Many communications firms will point to the volume of media hits as an indicator of the success of their brand-building efforts, which in some cases can indicate meaningful activity and interest. Often, however, they would not. Simply counting mentions in the press or on the Internet will distort an accurate view of the brand’s impact.
The key to assessment is to return to the firm’s business goals that informed a firm’s communications programmes. It is not about activity, but effect. What were the things the firm was trying to achieve? Greater deal flow, new LPs, greater visibility among intermediates? Or was it more qualitative: did you want the firm to go from being known as a buyout to a distressed shop? Ultimately, it is against these quantitative and qualitative yardsticks that firms measure the success of their branding and communications efforts. It is far from a scientific process, as the most telling endorsement may come from a banker you meet in an elevator. It also takes time. Communications efforts will not work overnight; a long-term commitment to investing in brand-building activities is essential.
Roland Tomforde is managing director with Broadgate Consultants, working with alternative asset clients in the areas of public relations, branding, reputation management and investor relations
This is an abbreviated extract from The Investor Relations Manual, a PEI publication. It’s available to buy now at www.peimedia.com/books
WORKING WITH A COMMUNICATIONS FIRM
Most private equity firms know how to pick a communications vendor, but not every firm understands how to maximise the value their communications counsellor can provide. A communications firm will add the most value when they are ‘in the tent’ and not kept at arm’s length, only to come in at the eleventh hour. To this end, it is important to build a relationship and maintain a regular dialogue with your adviser so that they can maintain situational awareness and an understanding of context. On any transaction and milestone, it is helpful to bring in communications personnel as early as possible.
Similarly, it is helpful to have a communications professional involved with brand-developing efforts – logo, website – from the start, to ensure that the proper thought is given to laying the key message foundation essential to the success of these items. Here are the top five things to keep in mind when working with a communications partner:
1. Set and maintain consistent goals
2. Keep them informed and bring them in early for milestone and event planning
3. Keep them involved on a meaningful, strategic level
4. Build a relationship with the individuals