Private equity firms have long tried to differentiate themselves from their competition, but the task has gotten more difficult with time. Today’s market features more than double the number of buyout shops and venture firms from just a decade ago, which makes firm recognition and the proprietary deal flow that comes with it more difficult to attain.
To see how the public relations of private equity has changed, take a look at the recent Capital Connection events hosted by the Association for Corporate Growth (ACG).
“Five years ago, a conference with million-dollar men standing behind tables hocking their wares – like it was a flea market of sorts – seemed crazy,” says a PR professional who wished to remain anonymous. “Today, all the firms are doing it and think it’s great.”
The conference circuit is just one of a number of ways in which private equity firms are spreading their word. The most common method is to forge a relationship with a PR firm. Estimates are that three out of four private equity firms (both buyout-focused and VC-focused) use a PR specialist at some point.
Larger firms are the most voracious users, and now require much more than just press releases. PR reps are regularly asked to proofread letters to limited partners, set up conference booths and send out mailings to both current and prospective portfolio companies.
Mid-market and smaller firms are more limited by cost constraints, and typically only employ reactive PR in response to specific events, such as deal or fund closings.
“PR is still limited to the bigger guys who are building brands,” explains Jay Jester, director of marketing with the Audax Group. “For a mid-market firm, there are 50 groups you need to know and somewhere between 10,000 and 20,000 companies. You can take care of all that by going to ACG events. These people don’t need investment banks to know their name because that’s not where their deal flow comes from. You want people to feel good about you, but your message doesn’t have to be everywhere.”
One firm that does want its message to be everywhere is American Capital, a Bethesda-based buyout and mezzanine investment firm that has been marketing itself heavily since being founded in 1986.
Mark Opel, senior vice president of business development with American Capita, understands that his firm is sometimes chided for sending out too many emails. But he argues that over-promotion is a far lesser risk than is under-promotion.
“You can’t rely on a bunch of historical relationships to put all this money to work anymore,” Opel says. “There’s simply too much capital. You need a clear strategic focus on marketing. I think the fact that so many firms are doing this now indicates how the sector is changing from a cottage industry to an institution.”
Whether firms employ an in-house resource or an outsourced agency, the ultimate goal is to secure proprietary deal flow.
“The biggest reason we get called is because firms are looking for deal flow,” explains Bill Haynes, senior vice president of Boston-based Arnold Worldwide, which represents private equity firms TA Associates and Arc Light Capital as well as industry groups like ACG. “The sellers want relationships now and public equity firms want everyone to have an increased understanding of what is setting them apart from the pack. They saw their competitors devoting resources to the market and thought it was working, so more people jumped in.”
Jester agrees that more firms are embracing the PR practice.
“You do find more and more groups saying, we have seen this strategy work so let’s bring this skill set in-house,” he says. “I am constantly being asked, How do I build this?'”
One method of brand building is to utilize the media, but many buyout firms balk at paying PR reps as intermediaries. Others eschew the press altogether, believing that making money is far more preferable to making a buzz.
“Why should we do that if LPs are giving us the capital and we are investing?” asks one buyout pro. “Why does anyone else need to know about it?”
This story originally appeared in Buyouts, an affiliated publication.