Creating market value: why invest in strategic communications

Why investors and investor-backed businesses should invest in strategic communications

Creating market value is the name of the game for private equity investors. The moment an investor buys an asset, it immediately joins the queue to be sold again. Straight away there is significant pressure to make changes to ensure it grows and can secure a higher multiple on exit.

I was at a talk recently and an investor spoke about how they could only make three to five big strategic choices to positively create value each year. Not many when you consider that only a proportion of these will succeed.

While GK Strategy is well known for its work as political, regulatory and ESG due diligence advisers in the deal process, we frequently work with investors to proactively create and communicate market leadership positions and mitigate downside risk for their portfolio companies. Although not enough.

Evidently, there is little point grappling with the political, regulatory or reputational risk level of an asset at the deal phase, only to do nothing to shape how it is perceived or its operating environment after the investment.

Understanding risk alone is insufficient

Working with private equity houses over the years, we’ve noticed a varied appetite for deploying public affairs or strategic communications initiatives to increase the market value of particular assets. Some investors leave these decisions to their senior management team while others take a more proactive interest – and there are good examples of both.

The most frustrating instances are when we are initiated too late, to limit the assumed damage from new policy proposals to their business model or market. However most of the time with positive, constructive engagement, businesses can shape proportionate policy making. This should always be the goal.

I wanted to talk about an example of how a proactive investment in strategic communications – combining research, message formation, tactical media relations and public affairs – has helped positively shape the market environment of an investor-backed health and care staffing business.

Case study: driving international nursing recruitment

Issue background

In 2016 the International English Language Testing System – known as IELTS – was introduced by the Government to limit immigration. The impact of the test was immediately clear – while making it tougher for everyone to come and work in the UK it was having a disastrous impact on the NHS, which relies on a rolling intake of English-speaking foreign nurses.

Our client identified IELTS as a problematic issue, and in particular, the fact that foreign nurses with a high standard of English were failing to pass because the test required a high minimum score across every testing category. In the writing test, for example, the pass mark was equivalent to that required for an MBA at Warwick Business School. The test was clearly not fit for purpose, and our client wanted to call for this to be changed.

Over time we built a body of evidence and messaging to tell this story, and in June 2017, a news story broke which gave us an opportunity to highlight our point. The NMC published nursing figures, which stated a 96% drop in international registrations. It became yet another ‘blame Brexit’ story.

A counter-narrative strategy

But the new tests had been introduced at a similar time to the EU referendum and we had evidence to show there hadn’t been a reduction in the number of EU nationals wanting to come and work in the NHS. Instead, using our evidence and the personal stories of competent nurses that had failed their language tests, we approached a national newspaper to pitch a counter-narrative story.

When our article was published, other titles ‘piggy-backed’ on to the story and within 48 hours the issue had snowballed, culminating with a Health Minister answering an urgent question in Parliament on the nursing recruitment crisis and with our briefing, clarified why numbers had dropped.

Following this the nursing regulator committed to a review of IELTS and whether it was fit-for-purpose. During this process, we continued to brief regulators, government officials and journalists with the latest data to support our case. We secured more than ten pieces of supportive national and trade coverage, which helped steer the narrative for change.

Achieving change

After the review was completed in October 2017, a new side by side test was introduced which accounted for the vocational nature of nursing work. This had a demonstrable impact, but the measures were too slight to resolve the issue. Our campaign continued but the direction of travel became clear; changes were needed to the assessment criteria for the existing test.

The following year the nursing regulator conceded that testing requirements were too stringent and agreed to relax the pass mark from writing level 7 to 6.5, alongside a level 7 in reading, listening and speaking. Since the new rules came in to place there has been an increase in the supply of foreign nurses to UK hospitals by more than 100%. For our client, this reopened a major revenue channel and delivered genuine public good in helping to fill deep workforce gaps.

The opportunity

These types of issues arise in every sector, and the prize for tackling them head-on can be significant in terms of creating market value, boosting reputation and deepening relationships with key stakeholders.

See more articles by Ned Lamb