As the founder of Droga5’s strategy practice, Jonny Bauer was essential to building the iconic agency into what it is today. So when he left the shop in April 2021 to join global investment management giant Blackstone, it was a head-scratching moment. The ad industry had become accustomed to seeing top talent leave to join buzzy startups, consulting powerhouses such as Accenture and tech titans like Apple or Facebook. But private equity? 

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Now, some 10 months later, the industry is finally getting an answer. Bauer is building a unique brand strategy and transformation practice for Blackstone’s 250 portfolio companies, whose brands include Oatly, Spanx, Bumble and Supergoop. In doing so, he has assembled a team of “strategy quarterbacks” as he calls them: Tom Callard, former chief strategy officer for BBH USA; Katy Alonzo, onetime co-head of strategy for Venables Bell & Partners; Kate Scott, previously head of strategy at Bullish; Olivia Legere, former VP of Estée Lauder’s creative excellence center; and ex-Droga5 Group Strategy Director Ben Brown. Bauer has also amassed a roster of top-tier agencies, including Goodby, Silverstein & Partners, Collins, TBWA\Chiat\Day, R/GA  and—yes, Droga5—to help him carry out his mission, which, as Bauer puts it, is “to unleash the power of brand to add maximum value to Blackstone portfolio companies.”

This is essentially a new model for the PE industry, said Joseph Baratta, global head of private equity at Blackstone. “Maybe 10 or 15 years ago, we would’ve been buying companies where the return was more predicated on operating efficiency and financial engineering, but today, with virtually everything we’re buying, the investment thesis turns on higher growth and business transformation to create a higher exit multiple than the one we’ve paid,” he said. 

Bauer’s role is to build brands in Blackstone’s portfolio by “thinking upstream” to help them grow or change their businesses. Bauer says the approach is more holistic than simply marketing and can involve everything from product development, strategy, dispositions, agency searches and retooling of the marketing suite.

“The idea is to break down many of the walls that [a brand] can typically bump into from an agency concept and allow [the company] to genuinely connect to and inform many other elements of the experience—be it product, be it employee alignment, or clarifying and galvanizing its purpose or role within a different category,” said Bauer. 

Simply put, it’s “making sure [Blackstone brands] are truly differentiated in every category.”

Scale and resources

This is no simple task. Blackstone’s fourth-quarter earnings report put the company’s total assets under management at $881 billion. Moreover, Blackstone is on pace to reach its goal of managing $1 trillion in assets this year. That’s equivalent to the combined market caps of Comcast Corp., AT&T, Procter & Gamble Co. and Walt Disney Co., which Ad Age ranks as the Nos. 2 through 5 U.S. advertisers. 

Bauer says his approach turns usual marketing practice on its head. “With private equity it’s normally a moment where there is a receptivity [for brands looking for capital] to change, and people come to Blackstone to partner with them to take their company to a new level,” Bauer said. “We don’t think of a brand as your identity or your name,” he said. Instead, a brand is really the product of strategy and purpose “to define the existence of why this company exists.”

Getting early access

Bauer has been busy selecting agency partners for Blackstone’s companies based on their needs and Blackstone’s investment thesis, which boils down to the firm’s reason for funding the company, where it stands in the market and Blackstone’s belief in a company’s growth potential. 

Currently, Bauer has brought on a number of agencies for different portfolio company projects; in addition to TBWA, Droga5, Collins, Goodby Silverstein & Partners and R/GA, it’s also working with Pentagram and a New York creative strategy firm called Gus.

Bauer’s team isn’t just helping existing Blackstone companies grow, but putting its experience to work to help vet potential investment targets. 

“As we’re diligencing a company, Jonny is able to add a whole other depth of conversation and color, because sometimes you see an opportunity where you can drive even more value, because he’s able to not just see what [potential partners] are doing and what the numbers look like, but why they’re doing it and what that potential is,” said Blackstone’s Global Head of Portfolio Operations, Jennifer Morgan, who oversees the practice and hired Bauer. “Sometimes brand [thinking] will help you really gain conviction of a company to say ‘Wow, this is an amazing opportunity’ and sometimes it can have the opposite impact. Sometimes you might say, ‘Well, this makes sense from a numbers perspective,’ but then you ask ‘Why does this company exist?’ It actually drives a different kind of conversation that sometimes leads you to not have conviction about something.”

One example of Bauer’s early presence in a deal process was Spanx. Blackstone bought a majority stake in the company in October at a valuation of $1.2 billion. 

“When we first started talking about a potential transaction, the biggest question on our minds by far was will we ever find a team to partner with that loves the brand as much as we do and really gets the brand,” said Kim Jones, president of Spanx. “We worked with an all-female investment team and they brought Jonny to the table on day one. That was really impressive to us because it just showed this commitment from Blackstone that they had this focus on investing in purpose-driven brands and the power that brand storytelling has for purpose-driven brands.”

Jones said that Bauer “used the exact same words that we use internally and it was such a cool moment in the process, where I looked around at our leadership team and it was almost like we had chills knowing he answered our question of whether we could find a team that really loved the brand as much as us.”

A big challenge for Spanx is making customers aware that the company isn’t just a shapewear brand; it sells women’s apparel as well. Bauer and his team are now leading a search for an agency partner that will assist Spanx in launching a new collection in the spring with the opportunity to work on the brand in the future. Avi Dan, principal of search consultant Avidan Strategies, has been brought on to facilitate the review. Bauer’s brand strategy team will also help Spanx find a chief brand officer.

Agency selection process

Spanx’s agency search will be conducted rather traditionally, but Bauer is taking a more unorthodox route with some of his brand transformation work. One example is Sphera, a Blackstone-backed ESG software company. The process of choosing TBWA\Chiat\Day New York for that business took only one month and required no spec work unlike typical RFP’s. Instead, under Bauer’s direction, TBWA met with Sphera’s C-suite to measure chemistry and the agency’s understanding of the business. 

“We’re trying to spare the agencies that exhausting pitch process that yields work that no one makes anyway,” Bauer said. “You can’t really get underneath the company’s skin within a pitch period. It requires a genuine partnership, openness, and collaborativeness that you can’t create in a bake-off.” 

TBWA is still in the early stages of working with Sphera, charged with transforming its business in a category, ESG technology, that is still fairly new. Nancy Reyes, CEO of the New York agency, said Bauer’s way of operating is “refreshing,” noting, “creating the conditions and figuring out the right partnerships based on other criteria feels like a much more modern way of looking at things.”

Finding a closer seat at the table 

A big selling point for agencies that Bauer has brought on is the fact that they are working with the entire C-suite for Blackstone’s companies, rather than just the chief marketing officer. That’s a plus in a world where shops have fretted that while consulting giants have the ear of the CEO, the ad agency’s influence rarely is felt beyond the marketing suite.

“He [Bauer] has the trust of the clients and the leadership of the companies that he works with to believe in the process,” said Bonnie Wan, head of brand strategy at Goodby Silverstein & Partners. “Often there’s a friction where you have to earn the faith and authority of the client before you can really begin to do the [brand] thinking and Jonny helps us overcome that really tricky hurdle.”

Goodby, which has five separate Blackstone assignments so far, started working with its largest portfolio company, Link Logistics, a real estate company that owns industrial spaces such as warehouses and distribution facilities. The company, whose biggest clients include Amazon, FedEx, UPS and DHL, owns more than 500 million feet of space in the U.S.

After sitting down with the Link Logistics leadership team. Bauer suggested that the company partake in Goodby’s Brand Camp, which required the company’s leadership team to huddle in a hotel with the agency without cell service for two days discussing the business and real estate industry, according to Luke Petherbridge, CEO of Link Logistics.

Petherbridge says his team came out of the retreat with a new mindset.

“We really want to change the internal—and our customers’ view as well—of where we sit in the industry, from being just a real estate provider to we are in the prosperity and productivity business,” Petherbridge said. “We are a b-to-b brand and we didn’t really think of our brand in the way that we should have.”

‘Deeper superpower’

Collins helped define a new category for Blackstone-owned Therma Holdings, which is a parent company for various HVAC, mechanical, electrical and plumbing companies. The company’s true brand potential was hidden behind its many services and offerings, according to Leland Maschmeyer, CEO of Collins.

“They had become so intelligent and capable in energy management in buildings that they built  the world’s first zero emissions school. When you take that really remarkable capability and you leave it in the world of HVAC and plumbing and electrical it’s nice, but it doesn’t have that much value,” he said. “But if you pull that fact out and you put it in the category of  lowering CO2 emissions globally, all of a sudden that little capability becomes incredibly important,” he said, “because 40% of the world’s CO2 emissions come from buildings.”

As a result of this insight Collins repositioned the company into the energy transition space and even created a term to classify Therma as a company that focuses on “efficiency consumption.”

Looking for a larger sense of purpose

The work being done at Blackstone is changing the mindsets of what agencies are capable of and creating a space for executives looking for a larger sense of purpose in a world that’s becoming increasingly project-based.

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“Feeling like the dumbest person in the room has really been good,” Bauer said, noting that he continues to learn daily from working with Blackstone colleagues. “These people are at a different level. I’ve had to learn to rethink the role of strategy to pragmatically be able to connect to all of the things that are happening. I have access to the C-suite that I never had. Typically my brand strategy thinking was always connected to growth, but now it’s also connected to value.”