• Andrew Honnor, managing partner at Greenbrook explains why an informed communication strategy is vital for PE firms to maintain and preserve their reputation and long-term value.

How did the pandemic impact the way you manage private equity firms’ communications?

The Covid-19 pandemic triggered a period of immense uncertainty and anxiety, raising challenges for private equity firms, and highlighting the necessity of effective communications and the range of stakeholders whose concerns and questions needed to be addressed.

During this turbulent period, we’ve become even more deeply embedded with clients, helping them to navigate the twists and turns of the pandemic; to communicate its impact on their portfolio companies; to explain its implications for deal sourcing and execution; and to help strategically position them for fundraising.

Overnight, firms became almost entirely virtual, limiting the personal interaction and relationship-building that had previously formed the bedrock of the industry. While we are all seeing a return to in person contact to some extent, one of the core challenges has become how to differentiate a firm in a crowded digital environment, an issue that has implications for deal sourcing and fundraising. The maintenance of the existing relationships was also a major objective.

LP relationships have been particularly important, with clients keen to demonstrate their efforts to preserve and grow investors’ capital in a dislocated market.

Has the role of communications in private equity evolved?

Communications has evolved from an afterthought to a standing item on the boardroom agenda. As the private equity industry has matured and become highly competitive, GPs have become more aware of the advantages of having a strong public and investor relations capability. With a fundraising market increasingly focused on brand and differentiation, we spend a significant amount of time with our clients helping them define their value proposition to investors and executing on strategic communication plans.

We’ve witnessed a huge acceleration in digitalisation, not least over the last 18 months, which has changed the frequency and channels through which information is disseminated, influencing the style and format of GP communications. Social media also continues to grow in relevance, requiring a rethink around the style and tone of corporate communications.

What new reputational risk factors have arisen in the last 18 months? How have you worked to manage these risks?

The industry has undoubtedly become subject to increased scrutiny by the UK media, as a frenzied period of deal activity has pushed notable buyouts to the front pages of many newspapers.

Despite the great strides the industry has made in transforming its image, it sadly remains characterised in some quarters by a handful of notorious, sometimes decades old, transactions involving household names. Internationally, the industry may face similar scrutiny as the pandemic continues to exacerbate social and economic divisions in society.

Making the case for private equity has therefore become a key focus of our work. Highlighting the positive social or environmental outcome of a transaction is becoming as important as emphasising its financial success. This includes demonstrating growth in employment, improved diversity, environmental protection and community support among other areas – all of which are important messages that exhibit the value the industry creates, beyond its economic returns.

How has social media become an increased area of focus when managing a firm’s reputation?

Social media has been an increasingly important corporate communications tool for a number of years. As it has become a more established part of all of our lives, firms are having to learn to embrace the opportunities social media provides. With the world driven further online by the pandemic, those opportunities have only grown.

GPs are able to conduct frequent communications with stakeholders, opening the door to more informal and often more compelling conversations than traditional communications channels allow. Social media allows firms to highlight their recent achievements or insights, outside of scheduled updates, creating increased contact with stakeholders and more opportunities to enhance their reputations.

How else can PE firms improve their image and reputation publicly?

To improve their image and reputation, GPs need to consistently act in line with their stated values and maintain a credible reputation around ESG issues. ‘Greenwashing’ is a key focus for many journalists, who are often cynical, and at times scathing, about private equity’s attempts to encourage positive environmental and social change. Furthermore, as media and political scrutiny of the industry mounts, GPs would be well advised to more publicly demonstrate their integrity and commitments to sustainability.

In a crisis, what steps can you take to protect a firm’s value?

Preparation is key, giving business leaders the best chance of staying on the front foot as they attempt to control issues that, left unchecked, could become existential crises. These types of event are, by definition, unpredictable, but having the appropriate systems and protocols in place can prevent firms from finding themselves at the mercy of unfolding events.

Speed is also vital. Assembling a small team of decision-makers with the knowledge and authority to commit to a strategy and agree a response can help to avoid a sense of paralysis, or a period of indecision, which can create a vacuum for negative reporting to fill.

But the right comment made at the wrong time can also be damaging. Experienced advisors can help ‘wargame’ different scenarios and advise on the optimal timing for public communications as a situation unfolds.

Honesty and accuracy in public statements is paramount. Crises often result in detailed post-mortems, where any misleading or disingenuous statements will be dissected and may exacerbate and prolong the crisis. The tone of statements will also be central to shaping public opinion – while some events may call for a robust rebuttal, others would be better addressed with humility and contrition.

While reputations can be destroyed in seconds by unforeseen events, an effective communications strategy often proves to be the decisive factor for firms successfully preserving their value.