The demise of Dick Smith and the poor performance of Myer since listing have had the nay sayers crowing from on high about the greedy and avaricious nature of that band of modern-day looters – Private Equity. From the outset I need to declare my hand on two levels – the first being that I too had grave doubts about Myer, possibly due to a built in aversion to retail stocks (more fool me…read JB HiFi) and the spruiking of the listing price reaching such a level of cacophony that I just couldn’t bear it any longer. Secondly, our business specialises in brand development and the rolling out new products/businesses/services – all exciting, and occasionally profitable stuff.
We cut our teeth in the early 2000s on the consolidation play of IPN GP medical practices that eventually ended up in Sonic’s hands – our role being the re-packaging of the brand and the roll out of the brand communications for the clinics nationally. At that stage, I was largely unaware of the role of PE in the process, we were just pleased to be working on what we saw as an important project with proper social benefits to the community at large. This was an opportunity to stretch our legs on a ground up consolidation project with a national footprint.
I have been knocking around the idea that what PE provides is, on balance a positive contribution to the business landscape and to the community in general. Sure there are a few rogue deals around that have losers in them but that’s the nature of business and proper due diligence should minimise the potential of downside for investors, be they the end investors in a PE promoted IPO, or the fund investors in the PE investment vehicle.
Why this point of view? There are a number of reasons. The first is commerce – generally, PE takes a business or a number of businesses and ultimately finesses them into a more complete and efficient entity that benefits the original owners and PE. Along the way, there is always casualties both within the business and amongst competitors – that’s the law of the jungle. On balance what emerges is a more efficient and usually expanding and operating business that creates jobs and by the nature of its expansion serves a greater audience and quite often with a better product/service offering as well – everyone generally wins – including the taxman.
An emerging theme of my life of late is the age old question about what am I doing with my life – am I actually contributing to a better world, or am I just grinding our marketing solutions for the benefit of my client with little or no regard to its impact on the planet. I realise that I always have the option to not work with a particular client should I feel uncomfortable with the product they want us to market and we have actually exercised this pejorative a number of times. What is particularly rewarding is marketing where the benefit is clear and contributes to people having a better quality of life, or indeed situations where lives are saved. This is part of our corporate social responsibility.
This positive contribution to society was demonstrated with our first-hand experience working alongside PE. Understanding the concept of PE is to make a profit however, this project did much more than that. In this project, the ROI was coupled with a large benefit to society. National Home Doctor Service provides after hours’ home visits by doctors to patients in need. In turn, this prevents patients that do not need emergency medical intervention turning up at emergency departments when a consultation with a doctor would suffice. This reduces non-urgent visits to the emergency service department, allowing those who truly need medical intervention to obtain it more efficiently. This ultimately saves lives.
Granted, the communication and the brand proposition is working a treat and hence, PE will profit handsomely but the flip side is a more efficient use of taxpayer funds to pay for what are services most Australians take for granted – and for free. In addition, the consumer experience i.e. a doctor visiting you at your home, as opposed to 6 hours in emergency is a large benefit to our community.
SunDoctors Skin Cancer Clinics is another PE consolidation play we launched that specialises in the detection and treatment of skin cancer – a major contributor to death and misery in Australia. The big benefit to this type of outfit is that it brings to people’s attention, by the very nature of its profile i.e. dedicated high profile clinic locations and specialisation, the need to have regular skin check ups. Again, this type of specialisation leads to better and earlier detection of skin cancers and a propensity to better outcomes for patients. The PE model here relies on revenue from patient consultations (shared with the Doctor), but mainly from the downstream pathology that is also owned by PE. Cynics may suggest that this model encourages the over ordering of pathology (which is ultimately paid for by Medicare) but logic and ethics does come into play. Firstly, there is no financial incentive for Doctors to order pathology in the first place (not suggesting that there ever is anyway), and clinical independence is a key tenet of SunDoctors pact with its Doctors and hence the pathology is only being ordered for clinically relevant purposes. The other big benefit of a high profile business that encourages skin cancer check-ups is that, on balance, serious conditions such as melanoma are detected early and hence people enjoy longer, better quality of life existences. Treatment of patients with such types of illness is expensive to our government and individuals involved. This means a new approach is to be taken, if that generates someone a profit then that is acceptable because in the end it’s benefiting society. Prevention is the future of medicine, not treatment.
So yes, PE is smart in identifying business opportunities such as medical services that are government funded and largely recession-proof. Nobody is stopping anyone from doing the same, it’s just that PE got there first. And is there a social, financial and community dividend for Australians? – undoubtedly. So what’s not to like?
Ultimately one of my marketing focuses is to help PE attain their goals. Not only to increase their return but to benefit our society if that is at all possible.
ABOUT THE AUTHOR
The agency’s senior suit and more. With over 25 years brand development experience in Australia, Singapore & Japan, Guy offers the marketing knowledge, strategic insight and creative acumen needed to ensure your product & communications solutions have a winning edge.