PRIVATE EQUITY IS WAKING UP TO THE NEED FOR STANDOUT COMMUNICATIONS
Private equity is waking up to the need for standout corporate and investor communications at what is a critical juncture for the industry, a new Bladonmore report suggests. Bladonmore CEO Richard Carpenter takes a look at the report's findings.
Following a stellar five-year run as the highest performing private asset class, private equity firms have had a stark wake-up call over the last year or so, as they tackle some of the toughest market conditions for over a decade.
The result? The bar for what constitutes good corporate and investor communications in private equity is being raised, and firms across the industry are under pressure to keep pace with the change.
It’s encouraging to see how a lot of private equity firms are raising their game when it comes to corporate and investor communications. The research highlights how good communications is trickling down throughout the industry – it used to be primarily resident in the larger players but we’re now seeing better communications practices trickling down into the mid-ranking and smaller firms. Those that fail to keep pace with change will likely find it harder to thrive in this challenging environment.
How can private equity firms drive their investor communications to the next level?
Bladonmore interviewed around 40 leading communications and IR practitioners from across the industry, to discuss how firms are adapting to these challenges. Combined with the consultancy’s own analysis, the report highlights a number of key recommendations.
- Go beyond the basics of ESG disclosure
An important focus for investors – and one where Limited Partners (LPs) believe firms could do more to improve. General Partners (GPs) need to do more than simply supply the required data and metrics – they must clearly highlight the wider connection between sustainability and value creation.
“It’s important for LPs to understand how the metrics that are being tracked and reported on are connected to value creation," says Samantha Tortora, investor, advisor and former global head of investor relations and corporate sustainability at BlackRock.
- Be increasingly proactive and transparent with your communications
Investors’ own reporting requirements have increased, and they expect a new level of frequency and depth in their GPs’ communications. Firms also need to be increasingly proactive about the information they are offering LPs on a regular basis – and work hard to get better and faster at it. Bespoke market insights that underpin the expertise within the firm are viewed particularly favourably.
“As an industry, we’re definitely seeing that shift towards being more open, transparent and communicative in a lot of different areas – ESG, LP communications and with investments across the board," says one head of communications at a European private equity firm.
- Communicating your approach to value creation is key
Firms have recognised that fund raising no longer comes quite as easily – even with longstanding LPs, many investors have started to question whether their GPs have the right strategy for the current economic climate.
Longer investment hold times mean firms have longer to play out their value creation strategies – and LPs expect to know exactly how you plan to do that. With a growing number of continuation funds, it’s important to show that the decision to stay invested in a business is based on strategy more than circumstance.
“A good story around the fund is critical. A lot of this comes back to how firms talk about their strategy and approach to value creation and how they show they’re following this," says Henrietta Dehn, director of communications (EMEA), Ontario Teachers’ Pension Plan.
- Develop a strong digital presence
Many smaller firms are relying on outdated platforms with poorly-optimised content and a laboured user experience to win investors over. Firms looking to attract new capital should seriously consider upgrading their website – a well-polished site is almost a prerequisite for fundraising in the current environment.
Social media channels are also becoming more important – both as a tool for investors to vet GPs, and for firms to target LPs.
"If your fund is looking to break out into targeting larger, institutional investors, website polish is critical," says Kaylee McCall Correa, managing director at Elion.
- Maximise the returns from your investor day
“We’ve tried to professionalise our investor days as much as possible, with high production values and strong video content," says Fiona Laffan, global head of corporate affairs at ICG.
This means investing the time and resources to pull off a stellar event that excites investors in the moment (high production value, diverse speakers, varied formats etc.), but also being smart about how you can use the content created for these events to form the backbone of your communications plan over the following months.