BRANDING & PRIVATE EQUITY: ACCELERATING ORGANIC

GROWTH

It is imperative that Private Equity firms focus on the branding strategy of its

portfolio companies in order to get a better valuation on its exit from its

portfolio investments. Investing a part of funding towards the brand

building in addition to its main focus on operational improvements would

help its portfolio companies have a competitive differentiation among its

peers.

BRANDING & PRIVATE EQUITY: ACCELERATING ORGANIC GROWTH

Importance of Branding for Portfolio

Companies of Private Equity

Private equity is often thought of strictly in terms of its role in financing the growth of mid to

large size companies. But many private equity firms take a proactive role in advising their

portfolio companies to help them grow, which in turn raises the value of their investment.

There are many ways PE firms help portfolio companies, and in experience holistic-thinking

and “brand-minded” firms often strive to put intangible assets to work to effectively bolster

their businesses. In such a radical industry, so focused on the numbers and the value of

tangible assets, brand-building might seem like a soft way to improve ROI, but:

“It is often all about money – about increasing value. It’s no secret that a business with a

brand that is well known in the marketplace will generate higher revenues, attract better

talent, and command a greater valuation.”

Branding is often undervalued because it is equated with its component parts rather than a

strategic initiative with supporting tactical pieces. If Branding is treated as simply a design

exercise of creating a new logo and prettying up new sales materials, no lasting value will be

created. In a world of increasing connectivity, crowded and sophisticated market places will

quickly see through these tactics – sometimes referred to as “being dressed up for the

dance.”

In contrast, a company seeking to wisely expand its market share by investing in its Brand

must shift its thinking from tactical to strategic by considering how it is currently

communicating and being perceived, both externally and internally. A successful Brand is

aligned with the needs of external stakeholders (clients, prospects, analysts etc.) as well as

with the strategic goals of the business in a way that is both credible and differentiating. It’s

not just a new look; it is refining or even redefining who you are as an organization and how

you serve existing and new clients better than the competition.

“Think about this as Brand with a capital B rather than brand with a lowercase b that is

mired in “window dressing” activities like logo development and related tactics. Branding

done strategically is a business asset that raises the value of an organization.”

Companies that have reached the level of receiving private equity funding have most likely

built a valued service/product offering, but oftentimes their sales and marketing functions

are underdeveloped, creating a substantial opportunity for improving the business.

Particularly for the companies that fall in complex B2B industries, many suffer from a lack of

awareness, an inability to consistently describe their business to clients, or both. Without a

well-positioned, consistent, and clearly articulated brand, investments in other aspects of the

business will not be able to reach their full potential:

“Money going into sales, operational improvements, new talent and new products and

services development will not be maximized if the business isn’t positioned and promoted in

the marketplace in a way that is strategically relevant to the company’s goals and

objectives.”

Conclusion

Hence Branding is very important particularly for that firm that receives funding from Private

Equity firms. It is a well-known fact that branding creates a competitive differentiation and

increases the intangible value of a portfolio firm. The PE firms should allocate a part of their

funding to improve the brand of their portfolio as this would help them in selling their

portfolio at a premium. Hence the valuations would be very good which in turn would give

high returns to the LP’s