Seizing Market Opportunities: Harnessing Critical Leadership Approaches in a Changing Business Environment

Patrick Jones

August 10th, 2023

Seizing Market Opportunities: Harnessing Critical Leadership Approaches in a Changing Business Environment

Delayed Exits, Changing Strategies, and Leadership Priorities

It’s been a slow few months for tech M&A. Mergermarket recently reported that the average deal value is down 60% year-on-year, while transaction volume has fallen 27%. Economic conditions have sparked greater caution amongst investors, with technology valuations dropping against the backdrop of higher interest rates and inflation, among other macro-economic considerations; meanwhile, the IPO markets have slowed to a crawl. The result, exits and strong returns are harder to come by for investors and leadership teams.  

For private equity-backed tech businesses and their leaders, the current conditions require a shift in mindset, and a need to reevaluate priorities, in order to accrete value in a more challenging market.  

2023 so Far – Navigating Changing Times:

With the situational narrative of 2023 acutely different to that of previous years, we’re seeing a re-focus on value creation plans and an evolution of investment priorities. We’ve picked out some of the observations from the year to date below.

1.     Driving Revenue and GTM: With a thrifty, spend-conscious market, driving value from your installed base has usurped new customer acquisition for some businesses. From a leadership perspective, many businesses are leaning into their revenue generation and go-to-market strategies to optimise the entire value chain for growth, from demand generation, and customer adoption, right through to the customer experience, and maximising lifetime value. From a functional perspective, we’ve seen a greater focus on Customer Success, with many businesses appointing Chief Customer Officers for the first time.

‘The Chief Customer Officer has evolved to drive “land and expand” strategies with responsibilities spanning the entire customer experience, and ongoing account management. We are in the era of customer lifetime value (CLTV), where customer experience, upselling and cross-selling are the critical factors of success.’ Reorientation of Revenue and Go-To-Market in Tech

2.     Leaning on NEDs: Current headwinds have caused elongated hold periods, re-positioning of business plans and a subsequent review of the situational experience of leadership teams. A knock-on effect has been the greater augmentation of Boards with a Non-Executive Director. In the current climate, a strategic NED can be a vital differentiator, bringing specific situational competencies for navigating new challenges, maintaining growth, supporting current team members, and augmenting cognitive diversity. 

‘NEDs can augment the current leadership team in terms of their situational journey, whether that’s embarking on an M&A strategy, a particular stage of organisational growth, a drive for operational effectiveness, or entering a new geographical market. A business looking to expand into the US could benefit enormously from hiring a NED on the ground… Or, if a business is going through a cloud migration, product diversification or entering new customer markets, a NED with the right situational competencies would be hugely valuable.’ How tech companies can help NEDs maximise multiples on exit 

3.     A New Breed of CHRO, Enhanced by Data: Despite the faltering economy, a tech skills shortage remains, with TechNation recently warning this could stifle growth further across the UK. As attracting, developing, and engaging employees has become a critical value driver, HR is a fundamentally strategic priority and a new breed of CHRO has emerged. Empowered by unprecedented access to technology and business intelligence, today’s CHROs are exploring new ways to access talent, inform decision-making, and drive growth in a challenging market, working collaboratively with their colleagues across the C-Suite. According to Accenture, 89% of CEOs now believe CHROs should play a central role in driving long-term, profitable growth.

‘CHROs can draw on data to inform decision-making and hold the business to account, through linking people strategies directly back to the investment strategy, while also communicating and demonstrating progress back to the wider business.’ A new breed of CHRO is driving value in high-growth tech companies

The Rest of 2023 and Beyond…

Despite some murmurs and light optimism that the second half of the year could see a recovery of deal flow activity, there is an equally strong argument to suggest the current trading ambiguity is here to stay for a little longer and into 2024. However, despite this, there are certain segments of the market which will hold higher appeal than others, with an overview of some of these areas written below:

·      Vertical Software Solutions

Investors are seeking out businesses with greater defensibility and in some quarters, this is driving a focus on vertically focused service providers and vendors. These solutions benefit from the ability to create a holistic suite of tools catering to the varied needs of one sector, with tailored features that drive a high level of loyalty and ‘stickiness’, while enjoying deep sector networks, and lower customer acquisition costs. Current examples can be found in the construction sector which, having been slow to digitise, is now making up lost time, reaping the benefits of SaaS solutions for driving efficiency and productivity while optimising working conditions and reducing costs and on-site risks. AI and machine learning also hold huge potential for these vertical sector solutions, enabling them to harness the power of big data and incorporate predictive analytics.

·      Cyber Security

As businesses are faced with a growing diversity of cyber threats, a proactive approach to cyber security is now business-critical to safeguard data and systems, and to comply with increasingly tough cyber and privacy regulations. The UK’s Network and Information Systems (NIS) Regulations were recently strengthened to protect essential everyday services, such as water, energy, and transport, from cyber-attacks, as well as important digital services like providers of cloud computing and online search engines. Under the rules, firms will be required to improve cyber incident reporting to regulators such as Ofcom, Ofgem and the ICO, and can face fines of up to £17m for failing to put effective cyber security measures in place. Changes such as these mean that top cyber-managed service providers are highly sought after by clients across a range of sectors, making them an attractive ever-green target for investors.

·      Digital Transformation and Up-skilling

Despite global headwinds, Gartner has predicted that IT spending will still increase 5.5% this year, while IT services (9%) and software (10%) spend are due to increase by even more, as organisations continue to digitise their technology and processes. But against this backdrop are UK talent shortages in areas such as data analytics, cyber security, software development and artificial intelligence, which threaten to significantly hold back digital transformation projects. As businesses strive to continuously upskill their people, demand for learning management systems (LMS) is on the up, and inevitably so is investor interest. According to Grand View Research, the global learning management system market size is expected to grow at a CAGR of 19.5% from 2023 to 2030, reaching  70.83 billion USD by the end of the decade.


All in all, the complementarity and balance of leadership teams have evolved significantly across 2023. Businesses have been presented with market ambiguity, with no end to the current economic challenges. Trading conditions will continue to be challenging, but with the right approach to critical leadership considerations, PE-Backed portfolio companies can remain resilient and capture market opportunity.

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