Private equity professionals are almost unanimous about the importance of building strong brands, and many are now beginning to embrace social media as a means to that end, according to a new study by BackBay Communications, a financial services public relations firm, and PitchBook, an independent research company.

“For fundraising, deal sourcing and attracting employees, a recognized and trusted private equity brand makes it easier for firms to succeed in a very competitive market,” says Bill Haynes, president of BackBay Communications. “Private equity firms are increasingly coming to recognize how important it is to build a strong brand and actively manage their firm’s reputation.”

The study surveyed 290 private equity general partners, limited partners, fund of funds, placement agents, investment bankers, intermediaries, lawyers and consultants serving the private equity industry in the US and Europe. It found near unanimity (98 percent) about the importance for private equity firms to have a strong brand, while 92 percent said a strong brand helps private equity firms source deals, with a similar proportion saying it helps them raise new funds. Four in five (81 percent) also said a strong private equity brand helps attract and retain talent.

“The industry is much more sophisticated now than it was even just ten years ago and a strong brand is a critical differentiator,” said Graham Hearns, managing director of global marketing/communications and talent management at The Riverside Company. “Sellers are extremely sophisticated these days. They understand the asset class and have lots of great choices. As they thoroughly evaluate their options, having a strong brand that keeps popping up in a positive way that has real teeth and attributes is critical.”

While performance (81 percent) remains the single most effective way to build a strong brand, respondents are increasingly recognising the importance of investing in active brand management. The proportion of respondents citing the importance of investing in IR to building a strong brand has more than doubled to 33 percent in this year’s study, while PR (up 86 percent), marketing (up 69 percent) and advertising (up 154 percent) have also seen dramatic increases.

A growing recognition of the value of a strong brand is being reflected in the budgets of private equity firms and others working within the industry. In the next 12 months, 56 percent are planning to invest more in their marketing materials and website, 44 percent to invest more in investor relations, and 34 percent to invest more in public relations.

In keeping with this focus on brand management, many private equity firms regularly revisit their brand identity, messaging and website with 35 percent updating it annually and another 35 percent updating their brand every two to three years. New fund raising and change in firm leadership are the main precipitators for brand re-examination.

Survey respondents say conference speaking (67 percent), personal meetings (67 percent), websites (55 percent) and news releases (50 percent) are the main areas of focus for brand building.

The private equity community is starting to embrace social media. Regular social media activity by PE firms increased from under 7 percent on 2011 to 12 percent this year. One-in-three firms now has a social media presence to enhance their brand, with the most frequently used tools including Twitter, Facebook, LinkedIn, YouTube or a company blog. Another 20 percent said their firm currently does not use social media, but they would like to start.

“Social platforms such as Twitter and YouTube are on the cusp of becoming a recognised part of the private equity communications tool kit,” says Toby Mitchenall, London-based director of BackBay Communications. “One-in-five of the world’s largest private equity firms is now actively tweeting, for example. A further one-in-five have registered their profiles but have yet to start tweeting. We estimate a good many more are using Twitter and other social media platforms in a passive way: as a listening post to gauge opinions of them, their portfolio companies and the industry in general.”