25th January 2024 Share article

CIL’s senior team reflect on what they expect to see in 2024

Jon Whiteman, Managing Partner

Value creation will continue to be a hot topic among investors in 2024, with a greater focus on driving returns through active management of their portfolio business performance. Pricing, digitisation and expansion of proposition will be key themes alongside a focus on recruiting and retaining talent within their investments. Ongoing macroeconomic uncertainties mean we are still not back to a steady-state level but we should see the market return to this over 2024. Some people expect an overshoot given the pent-up demand. But I think it is fairer to assume that we are seeing a reset to a ‘new normal’ that considers higher interest rates persisting which will suppress deal activity versus the low-cost-of-money world we have enjoyed for so long.

Alex Marshall, Senior Partner

In terms of the macroeconomic environment, I think the US economy should continue to outperform the UK in 2024. Inflation in the US should cool, but may remain stubbornly above the Fed’s 2% target throughout the year. However, the UK will no longer be so much of an outlier when compared to the Eurozone in 2024, perhaps outperforming Germany. I anticipate a more controlled inflation environment, with inflation settling around 3% in the UK and under 3% in the Eurozone by year-end. Like the Fed and the European Central Bank, I’d expect the Bank of England to start gently bringing interest rates down, but likely being above 4% by year-end.

Mike Gorham, Pricing Director

Pricing will remain high on the value creation agenda, with the need for objective market research and professional support increasing to ensure strong returns on pricing initiatives, in tougher market conditions. With inflation falling, across-the-board price changes are more visible and less successful. It is now even more important to conduct market research to uncover segmented customer willingness to pay and build that insight into a pricing structure that supports the business’ strategic goals. This needs to be supported with effective pricing control to manage discounting and prevent price leakage, whilst monitoring and proactively managing churn.

Rebecca Pigula, Partner, North America

I expect that general deal flow in the US will pick up during 2024, though the rebound date continues to get pushed out. Sellers are waiting for more successful outcomes before courting buyers in earnest. Many would-be buyers remain tentative, with their focus on the highest quality assets only. However, target company performance, improving economic certainty, and eroding time and patience may mean that the watching-and-waiting period will soon be over. This could mean an increased number of deals in sub-sectors that remained quiet in 2023. Whether due to a post-COVID softening, as seen in life sciences and technology, AI concerns such as those in the legal services sector, or macro-economic uncertainty.

Tabby Elwes, Partner, Media

In the media sector, we expect 2024 will see a continued emphasis on consolidation. Investors in digital marketing will pursue buy & build strategies to create integrated platforms that deliver the scale for technology investment and enable cross-selling between activities and brands. We also expect consolidation in sports services, driven by the need to provide the broader range of commercialisation capabilities increasingly required by sports bodies and teams. In the highly fragmented production services market, players will look to consolidate to operate across geographies (and therefore optimise tax breaks) and drive efficiencies (to secure contracts from margin-constrained producers). While the focus on consolidation will drive demand for complementary bolt-on assets, it will also increase demand for value creation services as companies seek to drive both cost and revenue synergies across their growing groups.

Mark Jeynes, Partner, Education & Training

In the education sector, I expect several key trends to continue. Firstly, there is an ongoing trend of consolidation in the nurseries sector, as PE-backed platforms continue to pursue buy & build strategies. Opportunities for alternative higher education providers will also continue to grow, as traditional universities look to secure new revenue streams in light of the ongoing challenging higher education market environment (e.g. fixed domestic tuition fees, rising costs and a difficult environment for international student recruitment given UK government policy). Appetite will increase among investors for training providers that offer ‘must have’ training that is required to ensure ongoing compliance with industry regulations. Such training is both recurrent in nature and largely ringfenced from the wider economic environment.

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