Telling the Private Equity Story

At the Private Equity News Conference in November last year there was much talk about the industry’s reputation – locusts, sharks and other less savoury animals were used as descriptions and it was generally agreed that communication with stakeholders and the public needs to be improved.

But why has it been a problem? After all, to most people the business of the private equity world is not complicated. Yes, the way they do it is sophisticated, but what they do is straightforward. A group of business people find some investors, start a fund and invest in a business where they can add value. They add that value so that the business is in better shape and worth more, and they get a return to their investors by exiting through a sale or flotation, leaving it stronger than ever, and all benefit. Some short-term pain may be necessary, but no one can say that an inefficient business is of any long-term benefit.

So why all the fuss? The answer is as uncomplicated as the business. The message of adding value is just not getting across to stakeholders, including investors, the press, trade unions and employees. Worse still, these stakeholders are left to draw their own opinions from a motley of information sources, and those opinions are often negative. While press initiatives, conference appearances and other public relations campaigns will provide the forums for influencing opinion, the communication has to be effective. And that’s where the industry has let itself down.

It’s all about key messages and evidence. Something you say is either a point you want to make or evidence to prove it. That evidence might be an example, an anecdote, some facts and figures, and some of those might be illustrated by a visual aid. If we agree that a listener will recall only two or three points from what he has heard or read, one might as well decide what those points should be, then find and present the supporting evidence.

But that is not what people do. The private equity industry is obsessed by facts and figures and by visual aids – it’s the nature of the industry’s analytical minds. For an important presentation, people turn to PowerPoint and create a document. It is called the pack, the deck, the pitch book or, at worst, the presentation. The pack is filled with evidence, charts, fantastic figures and diagrams. The speaker uses this document as a vehicle for discussion, adding examples and more figures – more “evidence” – to justify his presence. The key points have disappeared in the mass of evidence and the listeners have to draw their own conclusions.

By all means plan a campaign for communicating to stakeholders. However, that campaign is a waste of time if the messages are not clear. Build the story about adding value, growing businesses and contributing to society around two or three clear key points, find enough evidence to prove them and be consistent. Maybe use a few supporting visual aids which reinforce what you say, but you tell the story and avoid becoming a commentator to a bunch of slides. The evidence will change to suit the audience, but the key points will stay the same, and the world will finally understand the contribution that the private equity industry makes.