By Charlie Rose*
In the past year, two very different deals have illustrated a truth private equity keeps forgetting: brand is not decoration, it is a strategic multiplier.
In June, European mid-market private equity firm Inflexion exited British skincare brand Medik8 to L’Oréal for an undisclosed but presumably handsome multiple.
Smart early bets on product positioning (how the brand is framed in the minds of consumers relative to competitors), global relevance, and distinctive brand assets (memorable logos, packaging, tone, etc.) turned a promising skincare start-up into a desirable acquisition for the world’s biggest beauty products business.
In this instance, early attention to brand equity – the valuable attributes built into a brand’s trusted reputation over the long term – did its job.
Late last year, US-based restaurant franchise chain TGI Fridays filed for bankruptcy. Years of financial engineering, sale-leasebacks, and debt-fuelled roll-ups left a bloated balance sheet. As its business weakened, the business failed to adapt its brand. Competitors modernised while TGI Fridays stuck with aging formats and under-invested in experience.
The primary causes of the company’s failure were COVID-19 and the company's capital structure. But, in the year up to filing for Chapter 11 bankruptcy protection, sales dropped 15%, dozens of outlets were closed while franchisees exited. There had been no reinvention of the brand. This left the company with no runway and, eventually, no buyers. Both Medik8 and TGI Fridays were highly reliant on branding but their attention to branding strategies contributed to wildly different outcomes.
Private equity is brilliant at many things: financial engineering, operational tightening, and inorganic growth. But most private equity firms remain suspicious of the value of branding. It’s seen as soft, intangible, a cost centre. Something for the next owner to figure out.
Working with many businesses backed by private equity, I have seen firsthand how some private equity owners recognise the importance of brand. But many do not.
Often, there is no clear model for how to assess brand strength, or how and when to invest in it. Even if the intent is there; the playbook often is not.
The result? Value is left on the table, or worse: value quietly erodes under the private equity team’s watch.
It does not have to be this way. With the right approach, brand can be one of private equity’s most efficient and effective growth levers. The trick is knowing when to pull that lever, how hard, and for what purpose.
How to harness brand
Before we go on, let us define the branding terms you need to know to effectively harness brand.
Brand equity is the additional value a business commands in the market because of its reputation, awareness, trust, and customer relationships. It affects pricing, loyalty, marketing efficiency, and exit attractiveness.
Product positioning is how your offer is understood in the minds of target customers: premium versus value, innovative versus traditional, expert versus general interest, etc.
- Distinctive brand assets are the visual and verbal cues that help customers instantly recognise and remember a brand – logos, colours, taglines, sonic identities, and more.
Brand isn’t just a logo. It’s the multiplier
Strong brands increase pricing power. They lower customer acquisition cost. They build resilience against commoditisation. They make achieving scale easier and inorganic growth cleaner. And they make businesses more attractive to the next buyer, especially strategic buyers who place a premium on brand equity because they understand its compounding effects.
Medik8 was a textbook example. Inflexion did not just back a science-based skincare company. They helped position it as a premium, performance-led, global brand. Inflexion invested in packaging, assets, and story. Not excessive spending, just the right investments at the right stage to make the brand scalable and desirable to L’Oréal. When L’Oréal buys, it is not just buying revenue; it is buying brand leverage.
TGI Fridays shows the flipside. The business was heavily leveraged and operationally complex. But the bigger issue was consumer relevance. Competitors modernised formats, menus, and brand experiences. TGI Fridays did not. Debt is survivable if the brand remains vibrant. But when customer experience, marketing relevance, and brand assets are neglected, everything compounds in the wrong direction.
We’ve seen the same dynamic playing out here in Australia.
Advent international’s acquisition of Zimmerman in August 2023 shows how Australian fashion’s global brand equity can deliver premium multiples. The stewardship of RM Williams by Andrew and Nicola Forrest’s investment vehicle Tattarang since acquisition in 2020, highlights the power of reinvestment in distinctive brand heritage to drive both local loyalty and global expansion.
On the flipside, the collapse of Dick Smith Electronics, after its late 2013 float by Anchorage Capital Partners, remains a cautionary tale of aggressive financial engineering with insufficient attention to long-term brand relevance. The struggles of clothing retail chains business Mosaic Brands prior to its collapse in June this year and the closure of vacuum cleaner retail chain Godfreys last year reveal how quickly value erodes when businesses fail to adapt their brands to market shifts or modernise their proposition.
The private equity branding playbook is not complicated
Ready to invest in brand? Here’s how to get stuck in.
Assess brand potential at acquisition: Is there latent equity? Is there a distinctive position to own? What investments will unlock growth? Think of Advent’s investment in Zimmermann – the firm was recognising global brand equity and untapped international opportunity.
Invest efficiently, not extravagantly: Build the brand architecture, positioning and assets that enable scale. You do not need big-budget ads. You need a distinctive, relevant foundation. Tattarang’s investment in RM Williams is a strong example – doubling down on heritage, story and capability rather than flashy advertising.
Prioritise brand architecture unification early: Particularly in multi-entity roll-ups, fragmented brands limit scale, confuse customers, and erode value. A clear, unified brand architecture reduces complexity, improves go-to-market efficiency, simplifies sales, and presents a stronger equity story at exit.
Know where you’re at: Early-stage growth brands need positioning and asset creation. Scale-ups may need a unified brand portfolio, employee value proposition or targeted communications campaigns. Mature brands may need investment to reposition the brand or reinvigorate the identity for contemporary relevance. Dick Smith and Mosaic Brands offer cautionary tales of when this lesson is missed.
Design for exit: Build a brand story that will appeal to the next buyer. Strategics pay for future growth narratives, not just trailing EBITDA. Medik8 is the standout case here – presenting L’Oréal with a globally scalable brand story.
Get over the fear of brand
Private equity knows how to quantify almost everything. But the sector still struggles to model brand as a financial asset. That is the opportunity: brand is quantifiable – in pricing power, margin protection, customer stickiness, acquisition efficiency, capital efficiency and exit multiple.
In a world in which private equity returns are tightening, debt costs are up, and easy arbitrage is thinning, brand is one of the last under-exploited levers in the toolkit.
Do you need to turn every portfolio company into Nike? No. But you do need to know which brands can become distinctive and valuable with targeted investment – and which cannot. Medik8 was the former. TGI Fridays, sadly, was not given that opportunity.
The best private equity firms of the next decade will not see brand as marketing’s problem. They’ll see it as enterprise value. And they’ll play the game accordingly.
Image: When Advent International acquired Zimmerman it was buying into Australian fashion’s global brand equity.
*Charlie Rose is a strategy director at branding agency Principals.