European digital services market: the investment opportunity

13th May 2024
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While the digital services industry faced challenges in 2023, there’s optimism for growth in 2024, with a focus on building integrated capabilities, leveraging AI, and driving scale via M&A.

CIL’s Media practice, alongside corporate finance advisor, JEGI CLARITY, conducted a comprehensive survey of leading independent businesses in the European digital services market to understand their outlook for 2024 and what opportunities they see for the year ahead. The survey revealed several key findings:

  • Cautious Optimism: 2023 was a difficult year for many digital services businesses. However, there is cautious optimism for 2024 given improving economic conditions with strong single digit market growth expected.
  • Integration: 59% of respondents expect a shift towards a unified brand with divisional sub-brands as key to integration. For multi-agency groups, integration will be a key focus for 2024, with the aim to drive top-line growth (as well as realise back-office synergies).
  • Marketing Services vs. Marketing Technology: There was 55% net positive sentiment in marketing services for 2024 vs. 45% in technology. Sentiment is most positive in marketing services where budgets are expected to bounce-back faster and be deployed more rapidly.
  • M&A to Drive Growth: 89% of respondents are considering near-term M&A to support geographic and operational expansion. Businesses anticipate that M&A will be a key driver for growth in 2024.
  • Valuations Remain Robust: While M&A activity was down in 2023 (20% lower than in 2022), valuations remained robust. Strong valuations are expected to continue into 2024 even as volumes pick up.
  • Artificial Intelligence: 60% of respondents are already implementing AI in internal or external work flows. While nearly all interviewees recognise the long-term opportunities and threats, most believe that short-term disruption will be muted.
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