What Private Equity Looks for in Marketing Before Acquisition

Private equity (PE) firms have traditionally been associated with financial engineering and operational improvements. However, in today’s competitive environment, investors are looking beyond balance sheets. Increasingly, they scrutinise the marketing maturity of potential acquisition targets.

Why?

Because marketing is a direct signal of scalability, brand equity, and customer acquisition effectiveness, all of which affect valuation.

Here explore what private equity looks for in marketing before acquisition, why it matters, and how businesses can prepare.

Marketing as a Value Lever in Private Equity

Historically, marketing was perceived as a discretionary cost, easily reduced during downturns. Yet evidence now shows that strong marketing capability directly correlates with enterprise value. A study by McKinsey (2019) found that companies with advanced marketing practices delivered 5–15% higher revenue growth and 10–30% higher EBITDA growth than peers.

Private equity recognises that marketing maturity is not cosmetic; it is foundational to growth. Modern private equity investment focuses on operational value creation, not just financial restructuring (Kaplan and Strömberg, 2009). Marketing sits at the centrally to this shift.

What PE Firms Actually Look For

1. Scalable Customer Acquisition

• Are there predictable, repeatable channels for generating leads and sales?

• Is customer acquisition cost (CAC) understood and managed?

• Is there a balance between inbound and outbound channels? Sustainable growth depends on systematic customer acquisition strategies, not ad hoc campaigns (Kotler and Keller, 2016) .

  
  

2. Brand Equity and Market Positioning

• How strong is the brand’s reputation in its sector?

• Does it command trust, loyalty, and differentiation? Brand equity is an intangible asset that drives both customer preference and financial performance  (Aaker, 1996). For PE investors, strong brand equity reduces risk.

  
  

3. Digital Maturity

• How robust are digital channels, analytics, and data capabilities?

• Is there evidence of ROI tracking on campaigns?In the digital era, data-driven marketing is a proxy for organisational discipline (Wedel & Kannan, 2016).

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4. Founder Dependence

• Is marketing overly reliant on the founder’s personal network or reputation?

• Is there a scalable system in place? Greiner’s (1972) growth model highlights the importance of moving from informal founder-led growth to professionalised systems, a key test during due diligence.

  
  

5. Customer Lifetime Value (CLV)

• Does the business understand the long-term value of its customer base?

• Are retention strategies in place? Research by Gupta and Lehmann (2003) shows that businesses with high CLV predictability are more attractive to investors.

Red Flags for Investors

When PE firms conduct due diligence, certain marketing weaknesses signal risk:

• Fragmented brand presence across websites, social media, and collateral.

• Lack of attribution marketing spend without evidence of return.

• No customer insight function decisions made without market research.

• High churn limited retention or upsell strategies.

• Over-reliance on one channel e.g. 80% of leads from referrals or founder networks.

Firms in dynamic markets need adaptive, evidence-based capabilities (Eisenhardt and Martin, 2000). Weak marketing systems suggest the opposite.

Preparing for Investor Scrutiny

Businesses preparing for sale or investment should professionalise marketing well before due diligence begins. Practical steps include:

1. Documenting CAC, CLV, and ROI metrics.

2. Building a consistent, investor-ready brand identity.

3. Reducing reliance on founder-led sales through scalable campaigns.

4. Investing in digital analytics and reporting.

5. Aligning marketing KPIs with business value creation.

According to Barney (1991), sustainable competitive advantage comes from resources that are valuable, rare, inimitable, and non-substitutable (VRIN). Well-structured marketing systems often meet these criteria, making them an underappreciated source of valuation uplift.

Scalability, Proven Customer Acquisition Strategies and Resilient Brands

Private equity investors are no longer satisfied with strong financials alone. They want businesses with scalable marketing engines, proven customer acquisition strategies, and resilient brands. Weak marketing is a liability; strong marketing is a multiplier.

For founders and boards, this means recognising marketing as more than a “nice to have.” It is an essential lever for valuation and investment readiness. The businesses that act early, embedding marketing maturity before investors knock, will command higher multiples and smoother acquisition processes.

References

• Aaker, D.A. (1996) Building Strong Brands. New York: Free Press.

• Barney, J. (1991) ‘Firm Resources and Sustained Competitive Advantage.’ Journal of Management, 17(1), pp. 99–120.

• Eisenhardt, K.M. and Martin, J.A. (2000) ‘Dynamic capabilities: what are they?’ Strategic Management Journal, 21(10–11), pp. 1105–1121.

• Greiner, L.E. (1972) ‘Evolution and Revolution as Organizations Grow.’ Harvard Business Review, 50(4), pp. 37–46.

• Gupta, S. and Lehmann, D.R. (2003) ‘Customers as assets.’ Journal of Interactive Marketing, 17(1), pp. 9–24.

• Kaplan, S.N. and Strömberg, P. (2009) ‘Leveraged buyouts and private equity.’ Journal of Economic Perspectives, 23(1), pp. 121–146.

• Kotler, P. and Keller, K.L. (2016) Marketing Management. 15th edn. Pearson.

• McKinsey & Company (2019) ‘Marketing’s moment is now: The C-suite partnership that can drive growth.’

• Wedel, M. and Kannan, P.K. (2016) ‘Marketing analytics for data-rich environments.’ Journal of Marketing, 80(6), pp. 97–121.