One tweet at a time

In retail a strong and recognisable brand name boosts sales. So can the same be said for a private equity firm’s brand name with respect to capital commitments? 

Branding may not seem a top priority in the industry. GPs are of course more preoccupied with their core duties in managing investors’ capital. A strong brand, it would seem, is more the result of hard work than a conscious effort on the part of GPs. But as we detail further below, a number of tools exist (more specifically social media outlets) that can enhance a firm’s reputation in the market above and beyond what solid performance figures can bring alone. 

But this is not to say GPs do not necessarily care about branding at all, as the public image of a brand is often intrinsically linked to how well it is doing in the market place. At the same time GPs know a familiar and respected fund name potentially offers a distinct advantage, especially when breaking into emerging markets where a strong reputation may mean more to investors still familiarising themselves with the industry. 

For those firms who do recognise the value in consciously building the brand name, market sources offer a few points to consider: “Every aspect of someone’s experience of you is part of your brand,” says 3i’s communications director, Patrick Dunne, suggesting private equity branding goes far beyond a name, logo and slogan.

“Your offering, performance, reputation, what you and others say about the business, how you behave, your values, how you present yourself and many other things have an influence. This is true whether you are pitching for funds, for a deal or for a great new hire.” 

Dunne says the 3i brand, which has been cultivated for six and a half decades, has been of tremendous help in developing the UK-listed private equity firm’s business over the decades. “In every country it has mattered,” Dunne continues, citing the funds most recent business launch in Brazil, where he believes the brand has helped it recruit the best possible team to break into what is widely seen as one of the most important emerging markets.

Robert Coke, chairman of the Private Equity Investors Association, a forum for EU-based LPs to exchange ideas and best practices, agrees a strong brand carries its advantages – namely the ability to recruit talent and gain traction in new geographies. 

However, it’s important that any brand building s followed up with solid performance to retain investors’ confidence, he stresses. 

Nicolas von der Shulenburg, managing director at fund of funds Portfolio Advisors, takes a similar view: “A brand will only remain sustainable if the firm associated with the brand is able to have continued success in fundraising. Once a private equity firm encounters difficulties fundraising, the brand becomes tainted.” 

However, in some instances, a strong brand based on prior success can carry a firm a long way before investors finally realise the fund performance no longer justifies the brand, says von der Schulenburg

DIGITAL MARKETING 

So if building a brand name has its advantages, how do firms go about it? A clever way to go about it might be to utilise social networking sites. However, it seems most firms have little interest in doing so. Nearly 40 percent of GPs do not and will not considering using social networks as part of a branding strategy, according to a November survey on the matter by public relations firm BackBay Communications. 

“In an industry where a firm’s client base can be a very small number, it is not surprising many firms have not thought about how they can utilise social media to build their brands. However, this is inevitably going to change,” says Toby Mitchenall, managing director of BackBay. 

The most obvious reason this may soon change is the need for GPs to communicate in a truly global industry under constant scrutiny from the media and other interested parties. “In the past, most private equity firms could operate out of the public eye, and had to communicate only with their LPs,” says von der Schulenberg. But “as many firms have grown they [now] have to devote resources and attention to communicating with stakeholders beyond just their LPs”.  

As a means of communicating with interested parties Twitter could act as a starting place. The micro-blogging site offers GPs the chance to connect and converse with other funds, journalists and those simply interested in the industry. 

“Those firms that already have a high profile and a wide sphere of influence through their portfolios should at least be monitoring social networks, in particular Twitter, even if they are not yet ‘tweeting’ themselves. GPs may assume that their LPs or investment bankers are not Twitter users, but journalists who follow the industry certainly are,” says Mitchenall. 

Facebook: branding tool for GPs?

And what’s being tweeted can be as simple as a recently circulated press release or announcement. 

LinkedIn, the professional’s social network, also offers the potential to build the brand image – allowing GPs to communicate with potential LPs and broadcast its name to job seekers and other professionals. 

Likewise social networking giant Facebook offers its advantages. A Facebook profile allows funds to post links to news articles, inform people about deals, or post photographs – however Twitter offers a more interactive experience with a wider group of people without the need to ‘friend’ people to view what they are saying, say sources.  

Social media sites are more than just an opportunity however, they also come with many public image risks that firms should consider. For example The Blackstone Group reportedly purchased hostile and derogatory domain names, such as blackstonesucks.com, in an attempt to insulate its brand name from online attacks.  Likewise some firms have taken similar measures for Twitter accounts and Facebook profiles. 

Overall a fund has to make up its own mind about what elements of social media to use depending on what it requires. “Brands are personalities. What is the perception of your audience, how are you seen, what is the feeling someone gets when they are presented with an image of your brand. This can help to understand areas of weakness but more importantly areas of strength that can be dialled up even further,” says Lovett. 

One trend likely to only continue to grow is that branding as a whole (and specifically the use of social media) will increase in the private equity sector as it has in other industries. If not, a private equity firm that does take branding seriously can only be seen as taking a step ahead of the competition.