Q&A: The Impact of Political Context on Private Equity Marketing

Political context can shape the regulatory environment, economic conditions and overall business climate in which private equity firms and their portfolio companies operate. As a result, some executives may feel inclined to leverage political messages as part of their firm’s marketing efforts. Plus, as politics have become increasingly polarized, our political identities are evermore intertwined with our professional lives and business decisions. However, politically charged marketing can hurt your bottom line, damage your relationships with investors and even alienate employees.

Consider the following questions to make informed decisions about your private equity marketing strategy in today’s politically charged climate:

How Do Current Political Contexts Impact Private Equity?

The global political climate impacts every private equity firm differently, depending on the geographic locations and industries in which your firm operates. Because 2024 is a presidential election year in the United States, political tensions will likely run higher than usual over this next year.

With this in mind, it’s important to remember the following:

• All private equity firms are impacted by the corporate tax structure, which can ebb and flow with each changing of the political guard. 

• Firms with portfolio companies in heavily regulated sectors such as healthcare, energy, artificial intelligence (AI) and telecommunications are significantly impacted by the complex regulatory frameworks that are shaped by the political flavor of the moment.

• Firms that arrange exit or growth strategies involving large-scale mergers and acquisitions, infrastructure projects or international deals may require coordination with government agencies, whose budgets and capabilities are tied to public policy that is influenced by politics.

• Geopolitical conflicts, such as those happening now in the Israel-Hamas war and the Russia-Ukraine war, can result in supply chain shortages that drive up costs and are disruptive to business.

Should Your Private Equity Marketing Strategy Use Political Messaging?

At the risk of sounding blunt, no.

Your private equity marketing strategy should not leverage political messaging as a means to attract investors and generate deal flow. Instead, the most effective private equity marketing strategies focus on your firm’s brand narrative, key differentiators and unique experience with successfully growing businesses within your niche.

Regardless of what your political stance is, there will always be some members of your audience who disagree. Attempting to build connections and cultivate loyalty over strongly held political identities will be counterproductive at best and damaging to your reputation at worst.

Isn’t ESG & DEI Messaging Political by Nature?

The rise of socially conscious and activist investors shows that limited partners have a demonstrated interest in some of the issues influenced by politics. But ESG and DEI considerations are not necessarily motivated by political context… they’re more about maintaining transparency, mitigating risk, establishing ethical business practices and building trust with investors.

Be sure to communicate your firm’s values and report on ESG and DEI metrics with a non-political, dollars-and-sense approach. Your messaging should be driven by data that underscores a positive impact on the bottom line, as well as intentional storytelling that highlights your firm’s positive impact rather than political motivations.

Should Your Firm Respond to High-Profile Political Events?

Occasionally, your firm’s marketing team may want to issue a statement in response to events that are political in nature. The Edelman Trust Barometer found that 54% of employees worldwide feel that CEOs should address contentious political and social issues they are passionate about in public. Similarly, 53% of consumers share the belief that every brand carries a responsibility to engage in at least one social issue that does not directly affect its business.

Here are a few steps to craft a public response when you feel it’s warranted for your firm:

1. Evaluate how the political event may affect your firm and its stakeholders. Is it relevant to them? If not, it may be best to listen rather than to speak on the issue.

2. Consider how issuing a response, or staying silent, could impact your firm’s reputation. Which choice is more likely to produce a better outcome?

3. Craft a thoughtful and strategic response that aligns with your brand and its existing values. Strive to maintain a neutral and apolitical stance, especially if the political event is divisive in nature. Be careful not to make claims that contradict your behavior and investments.

4. Monitor your firm’s communication channels and respond to all feedback individually.

Should Private Equity Partners Get Involved in Politics?

The question of whether or not private equity partners should vocalize their politics is more of a gray area. Private equity professionals have broad networks that likely include relationships with political figures or involvement in political organizations. These connections are generally beneficial to your firm even if political discussions come up from time to time.

Of course, your firm's executives and partners are entitled to freedom of speech under the First Amendment. There’s nothing outwardly wrong with them expressing their opinions so long as they do so respectfully and make it clear that those opinions are independent from your firm.

What About Private Equity Political Donations?

Private equity firms, like many other businesses, may choose to make political contributions through independent employee donations or Political Action Committees (PACs) to support candidates, parties or causes that align with their interests. This is a legal and common practice, but it shouldn’t be part of your marketing message unless you need to address it from a crisis communication standpoint.

If your firm is involved in political donations, maintain transparency with your stakeholders by reporting contributions to PACs and other political entities in accordance with legal requirements and industry standards. While private equity donations typically favor Republicans, it may be wiser to direct contributions toward issue advocacy rather than endorsing specific candidates. This approach positions your stance as more neutral and helps you avoid the potential controversies associated with supporting certain political candidates.

What Political Challenges Will Firms Face in a More Democratized Private Investment Sector?

As private equity investing becomes increasingly democratized due to a more diverse group of investors from a wide variety of professional backgrounds entering the arena, investor relations has evolved into a much more complex area.

The private equity investment landscape has historically been homogenous and is slowly making strides toward being more diverse and inclusive. In fact, it’s estimated that 67% of investors identify as white, which is actually a 6% decrease from 2019. Over the next decade, it’s projected that women, Millennials, GenZ, and underrepresented racial and ethnic groups will control significantly more wealth.

This means that private equity marketers must tailor their investor relations strategy to meet the expectations of additional personas who may stray from the traditional political stances of private equity professionals. It will be more important than ever to tell your firm’s story with data, visuals and case studies that demonstrate positive outcomes and communicate your brand’s values independently of the political ideologies of anyone at your firm. Be inclusive in your investor relations strategy and avoid alienating anyone who may be in the political minority, as having diverse investor perspectives can only strengthen your firm and portfolio companies.

Especially considering the upcoming election cycle, private equity firms will face nuanced messaging challenges influenced by the global political context. To thrive in any political climate, your firm must stay informed of the events, regulatory changes, economic conditions and public sentiment that could potentially impact your firm’s marketing message and investor relations strategy. The most effective private equity marketing strategies evolve along with the political landscape and uphold transparency with their stakeholders when engaging in political activity that affects the company.