2023 was a year with lots of headwinds. Starting with sky-high inflation, followed by rising interest rates and increased geopolitical uncertainty. Despite this, we managed to grow 4x in revenue and delivered more than 80 projects for our clients.
We believe 2024 will be a year of transition. Even though markets will continue to show insecurity, companies will use 2024 to get things in order and prepare for further growth in 2025. In the meantime, lower interest rates and increased investments in ‘hot topics’ like the energy transition and AI will create new opportunities. The labor market will remain overheated, but the demand for talent will be more specific in areas like turnarounds and electrification.
These forecasts on the market make room for potential in 2024. What kind of opportunities are out there for (PE-backed) mid market companies, investors, scale-ups and corporates as well as (aspiring) freelancers?
Mid-market / SMEs: Restructuring continues, but growth is on its way.
In 2023, SMEs in sectors like retail, wholesale and e-commerce faced severe difficulties. Rising prices of raw materials, supply chain issues and increased performance marketing costs made turning a profit hard. As a result, we saw an increase of turnaround, operational efficiency and restructuring projects.
In 2024, we believe dust will settle. Some companies will continue to restructure. Those who managed to turn around already, and companies active in favorable markets like the energy and healthcare sectors, will likely experience room for growth again.
For freelancers, this means a continued flow of support on turnaround and operational efficiency projects. But also an increased demand for projects focused on growth like M&A and (geographical) expansion. Since budgets will still be restrained, the model of working with flexible and friendly-priced freelancers vs. established firms has its advantages.
Private equity: Deal volume will pick up again, value creation remains an important challenge.
2023 was a bad year with respect to deal volume. At Sweav for instance we saw many clients canceling on due diligence projects last minute, mainly the result of high financing costs and disappointing current trading results of targets.
Value creation, actively playing a role to boost the portfolio company value through (operational) improvements, was therefore again a hot topic on the partner meeting agenda in 2023. Finding out the right model for continuous and structured value creation, however, is still something many firms struggle with.
In 2024 we expect more deals to take place, as interest rates will likely decrease and financial results will improve again.
We also expect that more private equity firms will take active value creation more seriously. PEs can play an important role when it comes to add-on acquisitions, post merger integrations, operational improvements, restructuring, pricing and providing resources to do so.
Finally, we see a trend of institutional investors becoming more serious when it comes to demanding ESG policy and reporting. We expect that many mid-market (PE owned) companies will have to invest in these capabilities.
For freelancers, we predict a serious uptake in project demand coming from the PE and portfolio space. Both within deals, like commercial and financial due diligences, value creation and ESG work.
Start & scale-ups: The funding struggle continues, except for those active in the energy transition and deep-tech.
The start-up funding climate in 2023 wasn’t too pretty either. Very little new large funding rounds were announced. The trend that well funded scale-ups like Otrium and Mollie hired freelancers to accelerate growth, vanished.
We foresee that (venture capital) funding will continue to be a challenge in 2024. However, we see two exceptions: start-/scale-ups in the energy transition and deep-tech space have an increased chance of getting the green light. For example, Sweav clients Sympower, Battolyser and Quatt managed to raise (significant) funds in 2023.
For freelancers and potential consulting or M&A exiters, a suboptimal funding climate means two things. First is that the ‘dream exit’ of many, taking a Chief of Staff like role at a scale-up, will be a lot harder. We believe that this will lead to more people deciding to freelance as a bridge period of ±2 years before moving on to a next permanent role. Second, for existing freelancers, more growth-focussed projects in the energy transition and deep-tech space will arise.
Corporates: Reorganizations will continue, innovation takes the hit.
For corporates, 2023 was the year of refocusing on their core business, resulting in lay-offs and reorganizations across the board.
These efforts disproportionately affect fields where independent strategy professionals are active in: (business model) innovation and large scale (digital) transformation. In H2 2023, we saw at Sweav that several corporate (strategy) projects were canceled last minute due to budget freezes. Also, large corporate acquisitions were near absent.
Will 2024 all be doom and gloom in the corporate world then? No. For 2024 we expect that less lay-off rounds will be announced and things get back in order. We also predict an increase in corporate divestments. Finally, we believe that the corporate investments in sustainability will increase in 2024, just like we saw with our client Nobian. Investments in innovation will remain largely absent.
What does that mean for independent professionals? Additional freelance support may be needed to manage reorganizations and divestments/carve-outs. Think about if you want to go this way: take courses, and above all start doing projects and learn on the job.
2024… Let’s go!
Overall, we’re optimistic about 2024. Even though it will be a year of transition, we expect that the total demand for both efficiency and growth focussed project support will increase. We also expect an inflow of new people deciding to take the freelance path as well.
The flexible and independent model of Sweav proved to work well in both good and bad economic times. We are looking forward to helping our clients make the crossing.