By Derrith Lambka, Director of Advertising at HP for printers + supplies
The connection of private equity and brand building and valuation
I’m here in the back of the room on a laptop “reporting real time” on what I am hearing from the speakers. Bear with me please – I’m a marketing person, not a blogger nor an expert on private equity.
Michael Kassan is the Principal of Media Link. He gave an overview and some background on private equity:
- Private equity is a broad term which refers to any type of noon-public Ownership Equity securities that are not listed on the public exchange.
- Most private equity fund investment is generally for those with a longer term horizon who can afford to have their capital locked in for long periods of time
- Private equity is generally offered only to institutional investors and high wealth individuals
- It’s hard to imagine a day in which your target customer is not continuously touching a product or service that is part of a private equity portfolio
Michael then introduced Anton Levy, a Managing Director and Global Head of Media and Consumer Practice for General Atlantic, a multi-national private equity firm that manages an excess of $15 billion with a diverse investment portfolio that has invested in over 160 companies with investments ranging $50 million to $500 million in companies taking either minority or majority positions.
We’re talking about an influx of private equity into the ad industry. Largest deals have involved private equity funds.
- Anton – as an investor…as people read about all consumer media trending to digital… Means dollars coming into this space. What attracts us as investors is the influx of talent and innovation into this space.
- Anton – private equity is probably one of the most over-used terms in the market. Helpful to look at vc, start up, late stage vc, seed and on the other end are turnaround artists and everything in the middle. We focus on the middle area of growth equity providers. We have a very different way of building value…how do we make returns for our limited partners…
- Revenue growth
- Margin growth
- Cash generation
- (sorry – blame the blogger – I missed one of his points…anyone out there have it?)
- Anton says they are looking for businesses that are growing revenue so marketing and brand are important to them.
Why consider private equity as a funding source? Anton’s belief is that their assets (money and people) bring independence and specifically these benefits to the companies they invest in
- ability to preserve a culture at a business
- have a culture of equity culture
- Ability to execute against a strategy quickly and conflict free…because the company is now unencumbered by being part of another brand hierarchy.
- Their clients also avoid the dysfunction of people who are looking for an exit and others who think it’s a terrible time to sell. Private equity can back people financially for what they want/need.
- They’re also taking a longer term focus of an investment than perhaps people have an appetite for in a private company.
- The perception is that we are financial engineers…they miss that we have a whole group of professionals we call our “value-add team”. We went out to find the best in class people to work with our businesses…on strategy, M&A, sales/marketing …we don’t charge fees…we are there to help. We have advisors and consultants and other advisors…so we try to bring capital and human resources to accelerate their success.
- With private equity funding we can help ignite innovation…because the company and brand are not part of a large conglomerate. We can partner with you to take the shackles off and look at what will really drive revenue growth.
Why do brands matter to a private equity? a brand brings flexibility (audience, trust, reputation you can leverage against)...a strong brand allows private equity funds to pay more.
Valuations of digital media? Anton’s point of view…
Valuations in the digital media sectors continue to be at extremely frothy levels because of the perceived growth…the business models that are taking place…we are moving beyond testing phase to marketers adopting digital media in a meaningful way…seeing premium valuation for premium companies…continue to see buyers and people like ourselves and strategic buyers buying talent and innovation aggressively…despite marketplace credit crisis.
Are ad agencies and marketers looking at brands and brand valuation the right way?
Anton – forward thinking marketers are looking at how to take that brand and extend that and build a brand that is global and cuts across categories…that lowers the risk so we can pay more for the brand.
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