Unlocking Success – How Will PE Investment Activity Develop in 2024?
Unlocking Success – How Will PE Investment Activity Develop in 2024?
Our series on the growing OMB sector and unlocking the potential for shareholders has covered an overview of the market, getting the right people on board, planning the timing for an exit, and advice for CFOs looking at joining an OMB growth story. We have been talking to our inner circle of private equity investors and advisors to gain some insight on how that market may unfold in 2024.
Our CFO Network Yorkshire Annual Report for 2023 highlighted that 23% of the 3,031 CFOs and Finance Directors in the region work in private equity backed businesses, with 33% of new hires being in that sector; in the East Midlands area, 20.2% of Finance Leaders are at PE-backed businesses. The high volume of appointments in 2023 was largely on the back of deal activity. This high volume across Yorkshire was also clear to see at the Yorkshire Dealmakers Awards held last month.
There is a difference of opinion in the market on the current appetite for PE investment – high interest rates are delaying decisions on the one hand, and there are large funds ready to invest on the other. In the first two weeks of December 2023 we were appointed by four OMBs who were all at the late stages of securing private equity investment and looking to recruit a new Finance Director. We hope that our experience points towards the more positive position in the market.
Gillian McBride has been speaking to her network to gain some deeper insights. She met up with one of the most experienced M&A lawyers in the region. David Milne is Partner at Squire Patton Boggs in Leeds and has worked with the corporate finance and private equity community for the past eighteen years:
"2023 was an inconsistent year for the PE/M&A landscape in the North and nationally. Periods of significant activity were followed by relative lulls where deals went on hold due to market uncertainty, concerns over inflation and interest rates and macro-economic factors such as global conflicts. Bolt-ons became more prevalent as PE has tended to consolidate what it’s got rather than ‘bet the farm’ on new deals. Of course, there were exceptions to this with really standout assets being sold to PE as new platforms, like Twinkl, where SPB acted on the sale to Vitruvian in February 2023.
Tech has bucked the trend and remained popular with both PE and trade buyers in 2023 - SPB acting on a bumper crop of deals such as BGF’s investment in Tribepad, Hippo Digital’s acquisition of Data Shed, and the sales of Intozetta to Experian, and Nimble to SCC. In a tough market, we also managed to complete sales in the food and consumer sector (sale of Freshcut Foods to Flywheel) and the manufacturing sector (sale of Alpha Instrumatics to Halma plc).
Financial services and wealth management remained buoyant with continuing consolidation in these markets. SPB client Progeny has acquired a steady stream of attractive targets, such as The Fry Group, Gibbs Denley and Fiscal Engineers. We were also very pleased to act on the sale of accountancy firm Haines Watts to Cooper Parry in September.
Private equity hates uncertainty. This is why I am optimistic about deal volumes this year. With the Bank of England predicting inflation to reduce to around 3% in 2024 and 2% in 2025, twinned with interest rates expected by commentators to go below 5% this year, and as low as 3% by the end of 2025, this stabilisation will inspire confidence in the market. If Investors feel comfortable that there is a level playing field and growing certainty in what the market will do, they can plan their modelling accordingly, back themselves to do better than their competitors, and invest their war chests. PE can’t sit on its hands. It needs to provide returns to investors, and stability this year will give it the platform to do just that.
The market doesn’t seem spooked by the prospect of a general election either (required by January 2025). With Kier Starmer being viewed as a moderate Labour politician, there doesn’t appear to be the panic over how Labour would handle the economy as has been the case in previous years. Having said that, some advisers may welcome a CGT-inspired rush from sellers to dispose of their businesses before any speculated rates rise – the false dawn in March 2021 before the April budget certainly provoked heavy deal activity. However, those murmurings don’t seemed to have started just yet."
Time will tell what will develop this year, but we are all a lot more conditioned to unexpected events than we used to be. We have worked with so many OMBs with outstanding performances in 2023, and we continue to be introduced to new relationships. We are looking forward to seeing how these businesses will unlock more of their potential in 2024.
We are talking to a number of other investors, advisors, CFOs and company owners, and will be sharing their advice over the next few weeks.
Our team have a depth of knowledge & experience to advise shareholders. We can also introduce them to the right advisers to ensure that they optimise their people plans to unlock their full potential. Please contact Nik Pratap if we can help you.
.jpeg)
.jpeg)
.jpg)
.jpg)
