Creating value and having the ability to source compelling deal flow are two of the core foundational elements of a successful alternative asset management strategy. These are especially important against the backdrop of the current macroeconomic environment as the shift from an ultra-low-yield world has given way to significantly higher rates. Firms that can harness the skills to articulate a transaction’s particular value proposition stand to benefit most from a quickly shifting landscape.
While defining the quantitative aspects of a transaction are relatively straightforward, many private capital firms are realizing the more qualitative aspects of a deal are equally, if not more, important from a communications perspective. The stakeholder universe has expanded beyond the realm of investors and limited partners (LPs), to focus on employees (the most important stakeholder group to long-term success according to the Edelman Trust Barometer), asset owners, customers, other general partners (GPs), the media and regulators.
As such, here are three key things for GPs to keep in mind:
Build it to Last
The nature of transactions has also shifted. With fundraising across the industry facing headwinds, the dry powder GPs have saved over the years (thought to be approximately $873 billion in 2022 according to Prequin) is likely to be geared toward bolt-on acquisitions with a substantial equity portion rather than outright megadeals financed with significant leverage. As such, it is imperative to have a value creation narrative as to why the specific investment matters, what impact the result will have within the industry and, more importantly, what solution is being solved for through this investment. This narrative arc will undoubtedly shift over time, but the industrial logic and thesis behind the transaction should be designed to last until an investment’s exit.
The Multi-Channel Approach
While the earned media universe is undoubtedly important, firms are taking matters into their own hands and leveraging “owned” channels which they control to articulate the core features of a transaction’s value. Popular publication platforms include blogs, podcasts, original video content, thought leadership and activations around key conferences. Given the amount of increased control afforded by the owned channel, take the opportunity to simplify. First and foremost, improve the readability of the press release by avoiding unnecessary jargon and elevating the core points of the transaction’s value upfront. Next, keep in mind that employees continue to be the most important stakeholder. More often than not it is the intellectual capital behind the idea or product which keeps it running, innovating and growing. Make sure to address the employee and convey both stability and value not only with an eye toward retention, but one toward recruiting even more bright minds.
Communications at the Core of the Commercial Imperative
None of these communications considerations are easy to get right and cannot necessarily be fixed overnight. Rather, it is important to note that the most successful alternative asset management firms are the ones which understand the importance of communications. A function previously viewed as a “nice to have” is now viewed as a critical element of a firm’s commercial strategy. The same mindset should be applied to each transaction, strategy or fundraise. View each inflection point in a campaign as part of the broader firm strategy rather than a single moment. The debate over whether and how the sum of the parts exceeds the whole will continue until the end of time. However, one thing is clear - the very best shot for trying to find an answer is through leveraging communications to further your commercial objectives.