Tuesday, July 12, 2011

Industry Thoughts | Private Equity and the Public Image

Wow. It's been a while since I've been here. Sorry for the delay, folks, it's been a hectic past few months, but rest assured, more thought pieces will be coming back to the blog!

That being said...

So DealBook this afternoon brought in a new post from Steve Klinsky (founder and CEO of New Mountain Capital and chairman of the Growth Capital Committee within the Private Equity Growth Capital Council) as a response to Deal Professor Steven Davidoff on how VC has a better public image than PE. Klinsky goes on to point out the total number of PE firms out there (1,800+) as well as his firm and others have reached out to the public in positive matters, from "social responsibility dashboards" to working with the Environmental Defense Fund.

I've brought up the topic of PE and its lacking PR strategy before, and this situation is no different. Yes, there are some PE firms that have reached out through social media and other release to educate the public about how their firms (and the industry) are beneficial:

  • ABS Capital Partners consistently releases information about their portfolio companies via Twitter
  • Blackstone now consistently puts outreach programs they do through the firm and their portfolio companies via Twitter 
  • Many other firms post jobs within their portfolio companies via Facebook and Twitter, as well as reaching out through LinkedIn
This outreach is great, and it's a good start. But the private equity industry's PR strategy is dwarfed by that of the venture capital industry (and even more dwarfed by the banking industry). You can argue that VC firms and banks have lobbyists at their disposal, but that's not even the largest reason why people know more about VC-backed companies and banks. They've found more consumer-friendly ways to reach out and they've done it extremely often.

So how can PE step it up? I think the solution is relatively simple: many recognizable companies from Dave & Buster's and Betsey Johnson to J.Crew and Hooters are owned by PE firms, so why not educate the public on how the industry has made these well-known companies better? (Dave & Buster's is a great example as Wellspring took it from being a bankrupt company and gave it an extremely powerful second life.) After you start the education on recognizable firms, you move towards the more complex ones, like the heavy machinery, manufacturing, and labor-heavy sectors. Besides, being able to slowly teach Americans that the industry has created American jobs across all areas is a formidable feat to have.

We'll see what happens with Congress as the carried-interest tax can keeps getting kicked down the road as well as how the SEC registration rules work. But if PE wants to build a stronger public image, work with what everybody knows.