the rise of private equity and the death of the brand

01/24/2007 11:41:00 AM
Tom Foremski of the Silicon Valley Watcher, is starting to piece together a really interesting series of articles about the growing influence of private equity companies on corporate America.

He shows that nothing is seemingly beyond the grasp of these organizations, even the massive IBM, is being talked about as a potential takeover and break up target.

As Formeski points out the implications and repercussions of this trend are huge and he highlights one critical point.

"Their temporary owners know much about financial engineering but what about strategic positioning?"

Private equity companies are about slashing costs and breaking up businesses to extract value.

They are not really about brand building they are more about teardown and scrap.

This cannot be good news for the marketers at this potential takeover targets nor the communication partners and agencies that work with them.

Here in San Francisco, we've just seen The Gap being put on the auction block and the first people to exit the company, were the marketers.

What they are fleeing from is the fear of working in a company run by a private equity firm that views marketing as an unnecessary cost and wants to slash all marketing spending and investment in the first 30 days.

The private equity firms might be great at financial engineering; shaving inefficiencies and unnecessary costs to leave the brands in seemingly better shape on the balance sheet.

However, after rounds of cost cutting, that can take a couple of years, the brand?s strength is often depleted by under-investment in the critical disciplines of innovation and marketing.
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