Why private equity firms should care about brand
Private equity firms use many strategies to drive value in their portfolio companies. But one they often overlook is brand. It’s a powerful lever, but, if neglected, it could risk leaving money on the table.
Let’s start with the facts first:
- A McKinsey & Company study revealed that brands with strong reputations generate 31% more return to shareholders than the MSCI World average.
- In another study, it finds that fast-growing companies spend more than slower companies on intangible assets such as brand. It concludes that companies that master intangibles investment are well positioned to outperform their peers.
- Strength of brand/marketing is the factor most frequently cited by analysts (79%) when asked how they appraise and analyse companies, compared with leadership quality (76%) and technological innovation (72%).
A strong, consistent brand is one of the most powerful levers for increasing perceived and actual business value. This means that private equity firms should prepare their portfolio companies’ brands with the same attention as their balance sheets.
But, in practice, how can a strong brand help?
By providing clarity: A strong brand helps you be crystal clear on who you are, what you do, who you do it for and why. It helps you reach the customers you chose to serve and helps investors understand your value and the space you occupy in the market.
By creating distinctiveness: A strong brand is distinct and therefore recognisable and memorable. B2B brands especially benefit from having a strong brand as it provides them with a powerful differentiator in the minds of target audiences compared with just talking about features and benefits.
By aligning teams: When your brand isn’t clear and inspiring, every bit of growth demands more effort. When it’s not aligned, it’s like mud, dragging down momentum and slowing progress. But with clarity on your vision and who you are, employees can align, trust is built, decision making can be streamlined and you move faster and smarter.
We have helped several private equity firms rebrand their portfolio companies to set them up for growth. We have brought clarity and focus to seemingly disparate brand portfolios, and we’ve transformed brands from quiet presence to leaders.
Faria – Shaping the future of EdTech
We recently helped Faria Education Group, a global leader in EdTech, to reimagine its brand and create a unified identity across its product portfolio. Through extensive stakeholder consultation and competitor review, we developed a bold, clear positioning: The relentless pursuit of better. The new brand creates standout in a competitive category and pride and belonging internally.
Hubexo – Driving global growth
When Byggfakta Group transitioned from public to private ownership with ambitious growth plans, it needed to unify under one single brand to replace a fragmented portfolio of over 60 regional product brands. We developed a new name (Hubexo), a simplified brand architecture going from 60+ product brands into five core areas, and a new visual identity built around the concept of connection and growth.
Brand is often overlooked as being ‘fluffy’ when in fact it’s the foundation for success. The evidence tells us that, if you’re preparing your business for investment or sale, you can’t afford to ignore your brand.
If your portfolio company’s brand isn’t where it needs to be to ensure future success, then you should take a closer look at it.
Contact us for a 30-minute free consultation.
Sources:
https://www.mckinsey.com/capabilities/tech-and-ai/our-insights/five-fifty-the-invisible-edge
IPA/Brand Finance Investment Analyst Survey
