Private equity and public relations

What is the effect on public relations of the purchase by private equity firms of an increasing number of major UK companies? 

If recent editions of PR Week are anything to go by, the initial stalking stage is good business for a number of major financial relations firms, but the in-house PR teams are commonly slashed once a deal goes through.

This would fit with a systems theory approach which proposes the benefits of public relations are best recognised in organisations with open cultures, where engagement and dialogue are paramount. 

When the focus is entirely on the short-term bottom line areas such as employee and community relations will be seen as less important.  Similarly, media relations activities are scaled back as PR is seen as a tactical, reactive, press agentry function rather than a strategic, pro-active, relationship building one. 

The communications strategy is likely to be of a one-way, need-to-know variety.  But is that the right approach?  Aren’t the reputations of the companies that private equity firms aims to turnaround their biggest assets to be managed and nurtured to deliver optimum returns?

Isn’t stakeholder management even more critical when politicians and unions are concerned, even opposed, about the increasing dominance of this form of ownership?  If nothing else, isn’t good pro-active media management necessary?  

of the Times notes the difficulty of practising public relations in the closed world of the private equity industry, which is “chronically shy of publicity”

has been in the news all year, largely generating negative headlines.  This week headlines come ahead of a meeting of the Treasury select committee regarding taxation

On Friday, Peter Linthwaite, Chief Executive of the British Venture Capital Association () resigned after criticism from members that he had failed to ““.

The believes the members set an unrealistic goal for the trade body:

Expecting the BVCA to mount a robust, well-argued defence of the indefensible is frankly unreasonable. Expecting them to do so in the full glare of the House of  Commons, while being set upon by predatory politicians, well-versed in the art of the sound-bite and salivating at the prospect of glorifying themselves by coming up with the most scathing put-down for the next days papers, is bordering on inhumane.  The MPs must be cock-a-hoop.  No political downside on this one.

The private equity groups, who have used the BVCA largely as a shield behind which to conduct their business, should ask themselves how they have managed their own PR during the industry’s entry to the public consciousness. HSBC doesn’t rely on the British Bankers’ Association to manage its public image – it does its own talking.

This is excellent endorsement for public relations regardless of the ownership structure of an organisation. 

It appears that those facing the hot seat in parliament this week have called on senior PR counsel – but this seems to be largely about the CEOs under fire being able to defend themselves rather than recognising the wider benefits and remit of public relations.  This is reflected in a call for funding a “publicity war chest” to defend the industry.

There seems to be little recognition that key stakeholders – such as the unions, politicians and the media, let alone employees themselves – need to be engaged through two-way communications in the modern business world.   The approach of private equity to public relations is dated and defensive.

Clearly those with the big incomes are used to getting their own way, with little explanation or accommodation.   But they cannot complain about a lack of public understanding when their approach to communications is secretive, closed and manipulative.

Whether private equity is good for public relations is debatable – but clearly public relations could be good for private equity.

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Heather Yaxley

Heather Yaxley is passionate about PR - teaching the CIPR qualifications, lecturing part-time at Bournemouth University and running the Motor Industry Public Affairs Association (MIPAA). I'm undertaking a PhD looking at Career Strategies in PR. I love sharing ideas and knowledge - connecting news and views by blogging on public relations and educational developments, especially relating to accelerated and active learning. I'm also a published author, qualified trainer and experienced consultant.

3 thoughts on “Private equity and public relations”

  1. The practice of PR in relation to publicly listed vs privately held companies is a really interesting issue and glad to see you’ve raised it here.

    In our time, certainly in the U.S., the 1970s growth of institutional investors (public pension funds, insurance funds, etc) that fueled the massive expansion of the stock markets has made large swaths of the so-called “private” sector increasingly “public.” The corporation’s ability to relate through good PR practices to its public — including the institutional investors and countless individual mom-and-pop shareholders — impacts share price and overall corporate well-being.

    When taking a public corporation “private,” the hedge funds and private equity investors are subject to far less regulation in terms of reporting and therefore far less media scrutiny. Their transparency requirements diminished, ostensibly while they are “turning around” the company, they see far less reason to relate to their public through the media. Ergo, diminished PR activity.

    Once they decide to take the company public again, i.e. “flog it” to the broader market at a profit through a public share offering, you can bet they’ll want the media onside and will suddenly hire a big agency to deliver a PR campaign to boost their brand and share value. Such are the PR cycles within the public-private shifts we’re seeing in the corporate world these days!

  2. Michael – that is a very clear explanation of the public-private cycle. I’m not sure it will be sustainable in the online world where there are expectations beyond financial/media transparency. Even privately owned companies increasingly need to manage reputation and engage with their various publics.

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