The day-to-day changes in the private equity industry in Asia can sometimes go unnoticed after its rollercoaster ride since the global financial crisis. For one, there is now a lot more competition, as LP’s have become significantly more discerning about which funds get capital. Another difference is that funds are taking a more hands-on approach to enhancing operating performance, rather than trying to generate capital gains from IPO arbitrage plays or simply by trading assets.
One consequence of this is that the bar of sophistication has been raised for much of the industry, which is now increasingly judged on a far wider selection of benchmarks than just financial track record. This in turn has elevated the importance of a strong brand and profile as firms increasingly compete on everything from funding and deal flow to investee company mentoring and retaining talent.
It is here that a strategic communications strategy can help private equity firms move to the front of the pack by proactively building their brand profile. Firms that aim to be at the vanguard of their industry should be seen publicly as leaders with ambition and expertise.
Often, the first time PE firms engage in planned communications is in acquisitions, exits or fundraising where it is fairly widely understood that good PR can help drive value when there is a need to influence various stakeholders. And as PE has grown – with bigger deals that are often cross border – firms need to be prepared for the increased scrutiny that inevitably follows.
But PR is not just about gaining publicity and shaping a story for the media and various stakeholders when there is a transaction. It is also about building a bank of goodwill for use on a rainy day – when there is an unexpected crisis or event that is outside your control. This is when building a respected company name – recognized for its positive record, understanding, and media profile can really show its value as a value protecting exercise.
This is as applicable to a hiccup during fundraising as it is to a crisis or a problem at an investee company. If the media does not know your company, its strategy or its executive team, often it is simply not equipped to put your side of the story and provide balanced coverage.
And today with a more informed, activist and connected public, a crisis can often come from more innocuous sources such as a disgruntled customer or ex-employee complaining on social media. Unanswered, this can escalate into a damaging smear on the company. In such instances, reactive crisis management will only achieve so much, given that it is now much easier for bad news to spread, and stick, in the public consciousness.
A common refrain from PE firms and even their portfolio companies is that they are consciously maintaining a low profile and plan not to engage with the media until they have reached a certain milestone or size. The assumption being that there is little downside from not being known by the public, media or other stakeholders, and often this is true. However, risk is everywhere, particularly in today’s volatile economy and an unknown entity – lacking relationships with editors and key writers – makes for a much softer target than one that is known and already understood.
An effective communications plan requires investment of time and effort in building a defined profile and in creating informed media relationships that will help weather the challenges thrown up by the PE rollercoaster cycle. While rewards are time and again seen on the upside, what is often ignored is the value preserved by limiting the fallout from the unexpected downside.