A Guide to Private Equity Firm Spinoff Communications
- Bill Haynes, Boston
You only get one chance to make a first impression – it’s just as true for new private equity firms as it may be for future in-laws or potential employers. In fact, one of the most pressing questions I’ll often be asked by private equity firm executives is: “What’s the best way to communicate a private equity firm spinoff?”
The private equity industry over the past decade has grown exponentially and, today, is comprised of over 3,000 firms in the U.S. alone. New private equity firms are spinning off every month. Post Dodd-Frank, the Volcker Rule drove banks to shed their private equity and hedge fund teams, which led to a rush of new firms to the market to start the decade. More recently, as the industry simply matures, we’re seeing executives leaving firms to forge their own path.
“If you are spinning off from your current private equity firm, you will need to raise visibility for your enterprise and communicate the rationale and value proposition of your new firm.”
In either case, if you are spinning off from your current private equity firm, you will need to raise visibility for your enterprise and communicate the rationale and value proposition of your new firm. With so many private equity firms competing for both funding and new deals, you will need to find a way to attract the attention of limited partners, investment bankers and business brokers, lenders, company executives and other constituencies within the industry’s many circles of influence.
To be sure, this requires a comprehensive communications plan that both creates a narrative for the new firm and employs the right mix of tactical components that hits the right constituencies with the appropriate messaging. While specific strategies can differ depending on the nature of the spinoff or the team involved, a thorough and well thought out communications plan will usually consist of the following elements:
Brand Development. Prior to any external outreach, a new team will want to build consensus around the key messaging and develop an overriding narrative to convey through their brand. Many spinoffs will focus on a certain industry vertical or deal size; others may target a specific region or part of the country. Before any new firm even decides on a name, they should understand where they fit on the competitive landscape and what their positioning will be to ensure their advantages are understood and known outside the freshly painted walls of their new firm. From there, firms can develop a brand ID, a website that highlights their distinct attributes, and marketing collateral aligned to their narrative.
Strategic Plan. Ideally, the communications plan will be in place prior to the launch of a first-time fund. Form D filings, for instance, will often tip off business journalists, who may report on news of a new fund with limited information. When this occurs, they’ll often assign their own narrative to the new firm’s objectives. For many new firms, it’s also often the case that prospective investors will seek clarity around attribution and the track records of key team members. When there are multiple funds in the market seeking credit for the same investments, this can often spill out into the media. This is why it’s particularly important to have messaging in place that bridges the team’s past experience to the strategy and goals of the new firm. Moreover, firms will want to have a strategic plan that explicitly defines what can be communicated to external parties at all stages of the fund launch. While the JOBS Act provided more latitude around general solicitation rules in 2013, new firms will want to take a strategic approach to their messaging from the very earliest stages.
We will often work with firms that have already raised their first-time fund too. In this case, the spinoff announcement can be coupled with the fund-close news in one press release and public relations effort. One question to decide is whether or not to share the news in advance with a targeted media outlet on an exclusive and embargoed basis. There can be a number of benefits to this approach, not the least of which the journalist will have more time to interview team members and write the article, and the news, itself, will likely get more play and enjoy a more advantageous placement within the publication. As pitching exclusives can be complicated and requires a relationship with the reporter entrusted with the news, this is an area where an experienced PR firm can help navigate unfamiliar waters and set the right expectations.
Confidential Q&As. Prior to any reporter outreach, however, it is helpful to think through all of the questions – easy and tough – you may be asked by the media, limited partners, intermediaries and others. Team members will want to prepare in advance answers to these questions to help ensure confident and consistent responses. Again, this document should include difficult questions for which there many not be a definitive answer, even if it’s only to prepare the team for any and all inquiries they may receive and build understanding around those areas that are not yet ready to be discussed.
News Release. A clear news release with facts, figures and quotes from a member of the management team is a critical component to a communications plan. It should explain the rationale for the spinoff, the focus of the new firm, the size of the fund, whether it met or exceeded the target if that’s the case, and the time it took to raise the fund if it was relatively quick (otherwise, save it for the Q&As). The first press release can serve as a foundational document that highlights why the firm is well positioned for success, as well as past achievements of the management team. To aid reporters covering the story, the announcement should also include the placement agents used in marketing the fund as well as any legal counsel that offered services as part of the process.
Email Communications. Sending out a nicely designed email blast to your network with your announcement and linking back to your website is an important step to share your good news. Third party providers such as Constant Contact or other email-distribution platforms can also help segment and track the outreach, while conveying a design and firm messaging that are aligned to your website.
Social Media. Creating a LinkedIn account for sharing both firm news and thought leadership is another way to complement the initial and ongoing communications. This makes even more sense today as all key audiences can be reached through social media, which also provides a platform for a call to action as these constituencies can respond directly with new opportunities. Twitter is also useful to reach journalists and is growing in usage among private equity firms. If nothing else, firms should think of it as one more distribution channel.
Media Tour. Arranging a media tour to meet face-to-face with journalists at their offices is a great way to build relationships and tell your story. Reporters will want to learn about your firm and get your perspective on investment trends. Moreover, in an era when many reporters receive hundreds of emails and pitches a day, a face-to-face meeting will go a long way to keep your new firm top of mind. Here too, it may be useful to hire a PR firm to help arrange these meetings, provide background information on the reporters you’ll be meeting and accompany team members on the tour.
Advertisement. Advertisements are another optional step. Oftentimes, placement agents may place an advertisement or seek to split the costs of an ad in a private equity trade publication. At the very least, it’s worth a conversation, as advertisements allow for a very controlled approach to promoting a fund close and managing the initial messaging. Some firms elect to design and place their own ad or tombstone to announce their spinoff and fund close.
Whatever communications steps you decide to employ, this is your chance to manage and project your message to the market, so be thoughtful and maximize this opportunity. A new firm and the subsequent fund launch or close will generate interest from both the press and others in your network. Make sure to fully leverage this opportunity to its fullest potential, as the window of interest is perhaps never wider than following a spinoff and new fund announcement.
BackBay’s experience in private equity spinoff public relations and branding includes bank spinoffs as well as partners leaving one firm to start a new one. Examples include: Banc of America Capital Investors/Ridgemont Equity Partners; Wachovia Capital Partners/Pamlico Capital; HSBC Capital Management/Graycliff Partners; Goldman Sachs Private Capital Investing/Bregal Sagemount; Tricor Pacific Capital/Parallel49 Equity; Brazos Private Equity/CenterOak Partners; The Riverside Company/Align Capital Partners.