Following the financial crisis of 2008 and its impact on the private equity industry, recent years have seen a return to stability and growth. However with LPs under constant pressure to deploy funds and generate returns, GPs need to find new investment opportunities that will deliver genuine growth potential, significantly testing their investment processes and portfolio management skills. We have identified five key communications challenges which will be keeping UK mid-market private Equity firms focused in the year ahead.

1.     Differentiating your investment offering

In a market saturated with mid-market growth-capital players, finding the right business in which to invest is becoming harder year on year. Companies that have a listing on the UK’s Sunday Times Virgin Fast Track 100 programme are the obvious candidates and are thus inundated with suitors, all demonstrating a track record of partnership, growth, trust and integrity. Lower profile businesses are no less sought-after and are heavily researched by origination teams all trying to find the elusive ‘needle in a haystack’. For private equity firms with growth capital to deploy, it’s now not enough to simply find great opportunities. The challenge is to differentiate your firm, in order to persuade potential investees that you should be their investment partner.

2.     Managing integrated communications and social engagement

In today’s social media-driven society, the way financial services firms communicate is changing. Businesses are judged much more on their social touch points and need to understand how to manage integrated communications across PR, social and marketing.  There’s an ongoing debate around how much actual impact social media has on reputation, profile or even ROI, but the most important point is that you can no longer ignore the key metric: ‘Risk of Ignoring’. 

3.     Delivering earnings growth

With political issues stemming from austerity in Europe, the looming UK General Election and falling oil prices, Private Equity houses can’t simply rely on GDP growth to generate returns. Investment partners need to work harder to seek out new growth opportunities, either through acquisitions or by entering international markets to take advantage of growing economies such as Lat-Am and Asia. It is through a global focus and buy-and-build strategies that step-changes in size and scale can occur.

4.     Regulation and transparency

The increasing drive for transparency across the wider financial services and banking industry, has led to Private Equity firms, particularly those managing funds, investing time and resources into reporting and compliance. The Alternative Investment Fund Managers Directive (AIFMD) is having a major impact on the asset management sector as it regulates alternative investment fund managers who market or manage funds in Europe targeted at professional investors. In addition, the Walker Guidelines for Disclosure and Transparency in Private Equity, first introduced in 2007, has led to a number of firms, for example Permira, publishing annual reviews and focusing on responsible investment.

5.     Reputational risk

With an increasing number of Private Equity firms seeking to raise funds from global institutional investors, and the challenging growth environment, reputation is more important than ever. Thanks to the rapid way sentiment can change across all media channels, especially social media, it is more important than ever to carefully manage reputation through responsible investment, very strict portfolio governance and integrated PR, communications and social media.