The mission for any private equity firm is to find innovative ways to grow their portfolio companies and maximize their profits.
More recently, some of the most forward-looking private equity firms have begun hiring brand consultants to work directly with their portfolio companies to build brand strategies and develop marketing plans. This new model is a distinct pivot for the private equity sector, where the emphasis has historically been on working with portfolio companies to improve operational efficiency or tweak their financial models.
By putting a premium on the brand health of your portfolio companies, your private equity firm can distinguish those brands in the marketplace, better communicate their value to customers and increase their profitability.
Let’s take a closer look at what’s driving this trend, including examples of how it has been implemented and how you can put it into practice.
Brand Value Has Increased Dramatically Over Time, Displacing Other Measures
It used to be that the majority of a company’s worth was gauged on tangible assets like real estate, land, equipment, inventory or vehicles.
In 1975, tangible assets accounted for 83 percent of the components of the total S&P 500 market value. In other words, the value of the vast majority of companies back then was based on physical things.
Today it’s almost the complete opposite. In 2015, intangible assets accounted for 84 percent of the total S&P 500 market value. What are those intangible assets? They are everything from trademarks and copyrights to patents and other intellectual property. They also include a company’s brand.
And one more recent study found that among companies that appeared in both the S&P 500 and on the Best Global Brands list, brand value accounted for upward of one-quarter of the overall intangible market value of those companies.
If you want to squeeze the most value from your portfolio companies, building on their brand reputation and developing a comprehensive marketing strategy around it has a clear impact on the bottom line.
Use Brand Evaluation to Assess the Value of Your Potential Acquisitions
With brand value making up such a large portion of a company’s worth, enlisting an outside agency to lead a brand audit is an effective way to determine whether a company will deliver a return on your investment.
A company may have impressive tangible and intangible assets, but wouldn’t it be useful to know how the brand is performing before spending time and money on an acquisition?
Blackstone, one of the world’s largest private equity firms, has used its agency partners to develop new markets for the companies. Their analysis includes evaluating how much a company could benefit from a brand boost, to such pointed questions as, “Why does this company exist?”
Some acquisitions might seem less appealing on the surface but have hidden strengths. A thorough brand evaluation by an experienced agency uncovers potential value that could otherwise be overlooked.
Brand Standards Promote Unity While Retaining Unique Brand Identities
As you know, it can be a struggle to create uniformity, consistency and cohesion across your portfolio brands.
Each portfolio company comes into the fold with its own distinct brand. But unless you have an established process and brand standards for these companies to follow, it will be a struggle for that brand to look and feel like it’s part of a larger family.
Working with an outside agency can overcome this challenge.
Agencies consult both private equity firms and their portfolio companies to develop clear brand standards and guidelines. Done properly, those standards should:
- Improve upon a portfolio company’s existing brand
- Retain the company’s existing unique brand identity and value
- Establish a clear connection between the portfolio company and its private equity parent
- Be scalable and repeatable across other companies in the private equity firm’s portfolio
Clear brand standards should inform every aspect of a company’s look and feel, whether it’s the design of its website, the use of imagery and video or its color palette and fonts. Developing and enforcing those standards pays dividends for the portfolio company and can be repeated and repurposed at a private equity firm’s other companies.
Agencies Can Advise Portfolio Companies Beyond Branding
In some arrangements, an outside agency advising a portfolio company on its brand can be enlisted to advise on more strategic matters.
Essentially, they become embedded with these companies, connecting with other members of the C-Suite beyond the chief marketing officer.
For example, Blackstone is sharing an agency partner with its portfolio companies to grow and evolve these businesses. This agency partner is engaging deeply with executive teams, collaborating on product development, marketing strategies and even reconfiguring the marketing team.
When those stronger relationships are established, an agency provides a deep and lasting change for portfolio companies and their private equity partners.
Give Your Portfolio Companies a Boost with Brand Consulting
Any time a company is acquired by a private equity firm, both sides have high hopes for a mutually beneficial and profitable relationship. The more that can be done to leverage the power of a portfolio company’s brand, the stronger the likelihood everyone can expect a successful partnership.
If you’d like to learn more about how Decker Design works with private equity firms like yours to get the most value out of their portfolio companies, we’d love to hear from you.