Not So SuperReturns

What’s in a name? At SuperReturn in Berlin last week, the mood was not festive: the spectre of WeakerReturns has cast a long shadow.

All signs indicate that traditional private equity approaches risk faring less well in today’s world.

In this reality, there is a need for private equity firms to focus on more than deals – they need to stand out from the crowd, tell their own stories, and demonstrate what it is that makes them uniquely capable of delivering in a difficult market.

Unmasking Additional Value

Heading into SuperReturn, SuperConsultancy Bain published its mid-year report on PE. Tellingly, it was called ‘Searching for Momentum’.

There were some choice observations in the report. ‘Multiple expansion’ alone is no longer feasible, and fundraising is tough: to mid-May this year, 64% of all buyout capital raised went to just 10 funds, and at lows not seen since 2018.

Ok, got that, but give me some hope.

Well, there’s hope in the human, and learnings for PE from the wider corporate and retail world on how to understand and better connect with its market.

Bain lands a few important points:

‘For funds that have struggled to meet their objectives this time around, it’s safe to assume that going back out on the road with a similar narrative a year or two from now will likely produce the same result’

‘The imperative… is to change the narrative’

‘Understand how LPs really see your fund and then translate those insights into stronger performance and more competitive market positioning’

‘The critical first step is a clear-eyed assessment of how you come across in the market: not what your LPs say to you (polite is their default) but what they really think of you’

Returns On Reputation

This is an evidenced point of view that we at Nepean have been progressing for some time. We’re pre-Bain.

We’ve seen the importance of advanced perceptions research, particularly in industries renowned for their discretion and webs of close relationships. Just because you know people, that doesn’t mean you know what they really think.

Our research revealed that the industry has already poached the best and brightest communications professionals from the corporate world, yet these star players are still too often left on the bench. Now is their time to demonstrate just what they, and their firms, can do.

The sophisticated players in the market have already used this downtime to better understand their critical audiences – watch this space for more research from Nepean on who’s winning the reputation game in PE. Now, the even more sophisticated will be acting on their findings, adapting their approach to investor engagement, and delivering on new fundraising and value opportunities.

Understanding the intangibles of your reputation has never mattered more. Communication is at the core of any strong relationship, and investors are demanding just a little bit extra.