When the private equity industry first got started, reporters (and the public at large) paid little attention. Our industry began at a small scale and operated largely under the radar. The private businesses bought and sold rarely made the types of headlines that public companies did.
Fast forward to 2018, and things have changed. Last August the New York Times published a multi-part series titled, This Is Your Life, Brought to You by Private Equity. Multiple other outlets from Bloomberg to Fortune have written similar pieces and reporters regularly write stories about PE investments, investor fees, tax structures, and more.
The private equity industry’s shift from largely off the radar to directly in the media spotlight has been gradual, but sped up in recent years as PE veterans like Mitt Romney, Wilbur Ross, and others run for public office. The highly-publicized, upcoming Illinois gubernatorial race also features two candidates who made their names as dealmakers. As political and business reporters dig into how these men made their money, private equity—for better or for worse—continues to live under the conventional media microscope.
Whether or not the industry’s portrayal is fair and merited is beside the point. The reality is that regular (and often negative) media coverage is a new normal that needs to be accounted for. Many dealmakers have read these stories and likely asked themselves: “Should I hire a public relations agency to protect my reputation?”
As a marketing advisor to PE firms, our short answer is “it depends.”
Promoting Reputation v. Protecting Reputation
Public relations campaigns are generally couched into two categories: “proactive,” where firms proactively pitch news about deals or new hires to promote reputation awareness, and “defensive,” which involves retaining a PR agency to respond to inquiries on the firm, its leadership, or portfolio companies. The former is meant to build a firm’s reputation, while the latter is meant to protect it.
We base a firm’s need for “defensive PR” on the following factors:
- Size: Because of their sheer size and large investments taken from public entities, mega funds often do (and should) have a PR agency on hand. For smaller funds focused on middle market investments, the need for an on-hand agency largely diminishes.
- Portfolio Company Exposure: Has your fund invested in (or are you nearing an exit) in specific industries that have been under scrutiny in the public sphere? This might include for-profit education, penal institutions, emergency call centers, or environmental businesses. Defensive PR should also be considered each time a portfolio company takes moves that are commonly characterized as negative, like layoffs or facility closures.
- Executive Profiles: The public profiles of your firm’s leadership matter. If an executive at the leadership level considers a run for public office or another avenue that could raise their reputation, expect reporters to dig into your company and your investments.
For a private equity firm dealing with any of these factors, having PR professionals or an outside agency on call to respond to inquiries is absolutely crucial. Keep in mind just how fast the modern news cycle has become. Speed is critical when responding to a wave of reporter inquiries, which is why we strongly suggest having a relationship with a PR rep or outside agency well in advance of that first reporter’s call.
However, if you are a firm focused on middle market investments in conventional industries and your leadership stays out of the public arena, the challenges and priorities you face are the flipped: How do you proactively drive coverage and generate awareness around new investments, successful fundraising, or community work? (Read more about how to proactively market your closed deals here.)
PR Agency Pitfalls to Avoid
Regardless of the type of work you hire them for, map out just how a PR agency will engage your firm going forward. For many across private equity, there are a variety of misconceptions about PR and its value to their reputation that should be cleared up before your firm finds itself in a rabbit hole of expensive agency retainers and disproportionate results.
Here are our main rules to follow and pitfalls to avoid:
- Limit Newswires: Newswires are expensive and designed for SEC Reg FD, not necessarily the sale or purchase of a private company. Ensure your PR agency isn’t charging excessive fees to write press releases for a newswire. Consider urging them to proactively pitch the M&A columns that matter and save your newswire budget for something else.
- Watch Retainers: For firms announcing only a few transactions a year, retainers might make sense to ensure you are top of mind among your audience. However, ensure these retainers are controlled and watched closely.
- Media that Matters: Ultimately, there are a small amount of media outlets consumed by private equity and intermediaries. We’ve found that only 6-7 outlets truly reach relevant audiences in M&A and thus it is imperative to ensure your firm has relevant relationships. In addition to this outlet (Middle Market Review), the priority outlets include Fortune’s TermSheet, Axios Pro Rata, PEI, PEHub, M&A Magazine, WSJ Private Equity Pro, and Mergermarket.
- Vertical Visibility: We find PE firms who have a presence among the outlets consumed by professionals in the industries they invest in can be incredibly beneficial. Whether you invest in software, heavy machinery, or health services, it’s valuable to share your industry outlooks with outlets that further your firm’s brand among business owners and industry talent.
- Email Announcement Expertise: As every PE professional knows, perhaps the most important task of an announcement is emailing your network. Some PR agencies will have designers on-staff who can create email templates that look sleek and are mobile-responsive. Make sure your firm can handle emails before you hire them.
Ultimately, the main factor in finding a PR agency is ensuring they have an understanding of private equity as opposed to grouping you among other clients like hedge funds, venture capital, or corporate acquirers. Ask for recommendations from the intermediaries and peers you work alongside, as many of them are likely utilizing knowledgeable PR agencies already. If and when you do hire an agency, ensure they understand your priorities at the outset. After all, it’s better to have your ducks in a row before that first reporter calls, lest you find yourself the subject of the next cautionary tale in private equity.