When uncertainty bites, a portfolio company may encounter unexpected influences which might have an adverse impact on performance, creating a problem for the sponsor to manage. Today’s landscape is shaped by inflation and economic pressures (including employer NIC), conflict, labour employment laws and practices, regulatory pressures and geopolitical instability. Business models once seen as robust, forecasts and revenue generation which now face real friction, and the influence of social media, regulators and the press have all heightened sensitivities around how organisations are both performing financially and also how they are treating their people. The old mantra for Private Equity sponsors about the importance of management still holds true, but is today being scrutinised and challenged by macro events.
Employment-related risks are becoming more complex and more consequential. What may have started as an operational issue – miscommunication, misalignment on incentives or leadership changes – can quickly evolve into reputational exposure. Human capital moves to the centre of the value equation. This shift requires employment due diligence to go beyond contracts and compliance. Firms must take a deeper look at leadership credibility, employee engagement and the overall health of the company culture. It’s not just about who’s on the payroll; it’s about who’s driving the plan forward and whether they are truly committed to its success.
Responding to the unexpected
Even with rigorous preparation and pre investment due diligence, unexpected issues arise. In addition to employment disputes, there can be cyber related concerns or supply chain failures which escalate quickly, especially when internal cohesion has started to fray. Fragmented or delayed responses only compound the problem, increasing reputational damage and stakeholder confusion.
A recent example reported in the press is the backlash faced by KKR after its acquisition of Superstruct, which controls major European music festivals including Sónar. Over 70 artists publicly boycotted Sónar, citing KKR’s alleged links to Israeli business interests in the occupied West Bank. The dispute turned into a highly public political issue, with artists, unions and even Spain’s culture minister condemning KKR’s involvement. Despite Sónar’s efforts to distance itself from KKR’s financial activities, the reputational damage extended beyond the festival to its private equity owner.
The most effective responses, to contain adverse impact, are fast, coordinated and consistent. That means having legal, communications and investigative teams already aligned before a crisis breaks. There’s no time to assemble multiple teams or place additional strain on already stretched employees. Businesses need a coordinated response from experts who can manage the situation, independently, holistically and efficiently.
This is where Protect, a one-stop shop for corporate reputation support and protection provides crucial coverage. Protect is a market-leading solution led by BCLP, drawing on the vast experience of our lawyers and experts including from Byfield, FTI Consulting and KPMG. Together, we provide a unique, integrated approach to reputation management, combining legal expertise, PR strategy and forensic support.
Unlike traditional advisory models, Protect is a multidisciplinary solution that gives businesses cohesive, strategic guidance in the moments that matter. It gives senior business leaders the clarity and confidence they need to prepare for, respond to and rebuild from reputational challenges, so they can move forward with purpose.
Staying ahead of scrutiny
Rather than reacting after the fact, firms are increasingly using services like Protect to run simulations, establish response playbooks and conduct readiness assessments. In doing so, they’re building a corporate mindset that can withstand public scrutiny and act decisively when needed.
This matters more than ever, because the scale of exposure is growing. With over 30,000 companies currently benefitting from private equity investment (30% for five years or more) the ecosystem is firmly in the public eye. And as investor timelines stretch and fundraising cycles lengthen, scrutiny is only increasing.
From workforce conditions to whistleblower responses, firms are being judged not just on financial returns, but on how they operate. Reputation has become a proxy for governance, risk management and leadership quality. It’s also a key determinant of exit readiness and investor confidence.
Professional services firms have an increasingly strategic role to play here in helping sponsors build the frameworks that support sustainable performance over the long term. Because reputation isn’t a soft issue. It’s a hard asset – and in today’s environment, it needs to be actively managed across the entire investment lifecycle.
