The Market
2023 was a tough year for CEO hiring in private equity.
A lower volume of new deals and exits, high interest rates and associated cuts to valuations were the main causes: only 22 EMEA headquartered software businesses valued at £100m successfully exited, whilst new deal volumes were down over 300%. Opportunities in 2023 were consequently fewer and the expectations for the hire were greater.
However, lower deal volume, high numbers of CEOs transitioning to Board work (‘going plural’), and an increased focus on existing portfolio quality from sponsors are leading to more thoughtful—and often creative—CEO appointments.
A new wave of software CEOs is therefore emerging, to solve four core challenges in the EMEA Private Equity software market:
Green Shoots
True conducted multiple CEO roles in European application software businesses in the last 24 months, with PE sponsors ranging from local growth funds to $50bn + buyout groups, with portfolio companies between £15m and £150m of ARR.
We’ve learned some key things along the way:
What’s next? More first-time CEOs.
As valuation metrics have shifted from pure revenue growth towards sustainable performance, consideration of first-time CEOs will continue at pace.
We have already seen numerous successful promotions from the Chief Product Officer and CFO community in EMEA, as well as some of the first CMO to CEO promotions in 2024; this latter stream has been a trend in the USA for at least 12 months. An increased focus on product-enhancing M&A, the need for viable founder successors, and the scaled leadership they bring will compound the trend.
Together, these changes suggest a greater focus on specific business challenges and routes to solving them, rather than attempting to ‘solve for everything’ in one hire. Numerous US and Europe headquartered technology funds have promoted these leaders internally in the last 24 months, with positive results; these hires have started to form ‘blueprints’ for other portfolio companies seeking creative solutions to the CEO question.
In 2024 and beyond, we are excited to continue building a new generation of software CEOs. From our expectations and those of our PE clients, we expect substantial change to the CEO population across European PE portfolios, and equally within US funds selectively targeting US assets.
Getting the CEO hire right has never been more important; honest dialogue and qualified data will continue to underpin True’s relationship with PE sponsors.
