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How private equity deals benefit from branding, fast

A private equity (PE) deal presents a compelling opportunity for private equity firms to activate the brand and amplify its contribution to the business in both the short and long term.

Branding work during the deal delivers short-term value by galvanizing the workforce, signaling change to the marketplace, and establishing a more appealing and clearly understood offering. In the long term, well-built brands outperform in the market by engendering loyalty and enabling companies to command a premium above competitors. Most importantly, strong brands have a purpose that gives customers a reason to believe and allows the company to stand for something.

Once the deal is made, the clock is ticking, and every second is potentially fleeting value. Brand consultancies have established leaner, more collaborative, and commercially-driven operating models to help extract this value for private equity funds, at their pace and matching their rigor.

In the private equity world, the return on invested capital goes through multiple gates. When the PE firm takes on money from investors and creates a fund, it’s on the clock until that money is turned into an acquisition. Once a PE portfolio company is purchased, there is often a two-year timetable during which dramatic changes must be instituted—often including a new brand positioning, R&D investments, employee training and hiring, and sales strategies. These changes need to be strategically sequenced, with the brand strategy supporting overall business goals.

Consider this: if the new business strategy dictates an emphasis on innovation to create market value, the brand strategy would need to reflect this—and soon.

For example, a commitment to R&D represented in these strategies would require a change in how employees think (employee engagement), an influx of engineers and product developers (talent acquisition/retention), and a shift in the way the sales force talks to and understands customers (messaging strategy, positioning). Doing the work to strengthen and communicate the brand and experience will ensure that business changes aren’t just made, but stick.

A publicly traded company, despite shareholder pressure, might have more time to cultivate the brand internally and allocate capital when it comes available. Because investors in the PE firm are expecting a better return—and because most PE portfolio companies expect operations to have righted the ship and to be on a stronger trajectory by the end of two years—decisions must be made rapidly, and often concurrently. Defining that trajectory, while taking on the role of business and brand strategist empowers PE firm operations as well as the C-Suite to confidently communicate clear and compelling value to the market.

With the right interpretation of the business objectives and contributions of key audiences, the brand strategy communicates the most valuable business opportunities internally, to customers, and to the market.

PE Operations comes to a company with the promise of reformulating its business model and catalyzing growth. As the PE industry has competed away returns—first through financial engineering, then through operational improvements—additional pockets of value have been called for. Operations has elevated its remit to improve the value proposition of acquired companies, but value is determined by how the market perceives and interprets the proposition. Often, an acquired company has legacy perceptions that must be overcome, or an ineffectual go-to-market strategy. Reaffirming that value through a purposeful and clear brand proposition, a clarified portfolio, or a new name with a compelling look is a signal of operational improvements and stronger business model. In the wake of an acquisition, the window to capitalize on those changes and to communicate them closes quickly.

Strong branding acts as a force multiplier of the valuable operations work PE firms do. 

The brand exists to bring business strategies to life and to communicate value clearly and distinctly. Given the power of strong brands to outperform the market, PE firms have a chance to pull a powerful lever by investing in the brand at the outset of the deal in order to differentiate from the competition and stay ahead of the curve.

Contributors

Senior Consultant, Strategy