How Coronavirus Is Impacting Lower Middle Market M&A Activity
Last week, Axial convened a virtual roundtable of members to review the impact of the coronavirus pandemic on lower middle…
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.”
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:
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.)
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:
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.