The concept of GPs communicating with anyone but each other was until recently a hard one for many private equity firms to swallow.
After all, a major selling point of private equity is that it is private. Proprietary information is kept close to the vest. The only meaningful communicating a GP should do is in the form of cash distributions, it might be said. Blabbing to the press and gushing to limited partners is indecorous, it has been asserted.
And yet, witness the burgeoning role of communications professionals within the private equity industry. These specialists are taking over tasks once performed, with varying degrees of effectiveness, by the deal partners – investor relations, public relations, marketing, brand management, portfolio company promotion.
Private equity GPs have spent no small amount of money on the services of outside PR firms. But increasingly, firms – even small firms – are hiring inhouse specialists.
The positions are so new that most of these private equity communications pros don't know each other, and have no ability to learn how their rather esoteric job descriptions are executed at other firms.
One group of Boston-area communications practitioners has decided to end this lonely isolation in the form of monthly, informal, but invitation-only meetings. In July, Private Equity International had the privilege of attending one such get-together, held at the offices of a Cambridge, Massachusetts venture capital firm.
This is not a trade association; it is a group of professionals who know and like each other and who want an exchange of ideas. The group has been kept small and discreet precisely so that this exchange may be as candid as possible.
Indicative of their relatively new positions, the gathered individuals had a variety of titles and responsibilities: one, who works at a large private equity firm, is charged principally with promoting the firm's operating prowess to potential portfolio company managers; another focuses only on IR; a third, at a smaller firm, is charged with IR, PR and everything in between.
Boston being the hub of America's mutual fund industry, a number of the communications professionals started their careers in the marketing departments of mutual fund companies. Suffice it to say that things are different at private equity firms, which not only are not required to disclose information to the public, but in certain cases are barred from making public comments. Add to that a reluctance among many GPs to broadcast good ideas and sensitive information to rival firms, and the job of a private equity communications pro is a case study in paradoxes. “We all face many of the same challenges,” noted a group member.
She added, laughing: “In the mutual fund industry, everyone shares everything, but here it's like the CIA.”
That said, the role of communications within private equity is becoming increasingly important. General partners realise they must compete fiercely with the sea of other firms for investors and deals. As with any business, differentiation and brand awareness are key, in addition to returns. For example, an entrepreneur unfamiliar with a venture capital firm is less likely to accept its bid. A limited partner that has been kept in the dark will be less forgiving of inevitable portfolio hiccups.
The assembled Bostonians had something important in common – all are the first communications or marketing specialist within their respective firms, a clear indication that the much-spoken-of institutionalisation and professionalisation of the private equity market is real and measurable.
One other thing: they all asked that their comments be off-the-record, a request that any GP will innately understand.