GPs to increase marketing budgets

With a consensus reached that a strong brand translates into more deal flow and ability to retain talent, more private equity firms are increasing their marketing budgets and a subset are paying more attention to their social media presence, according to BackBay Communications latest industry survey on branding.

Over the next 12 months, a majority (56 percent) of firms operating in the private equity industry plan to invest more in their marketing materials and website, while 44 percent plan to budget more money for their investor relations function, the research shows. One in three firms say more money will be used for public relations.

BackBay surveyed 290 private equity partners, limited partners, fund of funds, placement agents, and service providers for their thoughts on brand value in the private equity sector.

The study found near unanimity (92 percent) that a strong brand helps private equity firms source deals, with a similar proportion saying it helps them raise new funds. Four in five (81 percent) said a strong private equity brand helps attract and retain talent.

“The industry is much more sophisticated now than it was even just ten years ago and a strong brand is a critical differentiator,” said Graham Hearns, head of communications at mid-market investor The Riverside Company. “Having a strong brand that keeps popping up in a positive way that has real teeth and attributes is critical.”

Social media use is also on the rise. One in three firms now has a social media presence to enhance their brand, with the most frequently used tools being Twitter, Facebook, LinkedIn, YouTube or a company blog, the research shows. Another 20 percent said their firm currently does not use social media, but they would like to start.

Some GPs question the effectiveness of social media for enhancing the firm’s brand. “It’s beneficial but does not help with the heavy lifting of building a brand,” said Riverside’s Hearns.

Speaking at conferences and personal meetings are the main way to build a group’s brand, two out of three survey respondents said. Roughly half of respondents cited website improvements and news releases as their main focus for brand building.

Nonetheless, some GPs use Twitter and other social media platforms “as a listening post to gauge the market’s opinion of the them, their portfolio companies and the industry in general,” said BackBay London director Toby Mitchenall.