Baird Capital’s Louise Kingston anticipates dealmaking uptick in 2024

‘While the UK economy may see subdued growth in 2024, we see international growth as a key driver for our portfolio.’

In the second instalment in our outlook Q&As for 2024, PE Hub Europe caught up with Louise Kingston, director at Baird Capital.

Baird Capital makes private equity, venture capital and growth equity investments. The firm has offices in London, where Kingston is based, Chicago and Singapore.

Baird’s recent deals include an exit from CAV Systems Group, a global aerospace supplier of airborne ice protection systems and drag reduction technology, and a minority investment in JMAN Group, a commercially-focused data consultancy company.

How do you expect the first six months of PE dealmaking in 2024 to compare with the last six months of 2023?

Dealmaking in H2 slowed considerably, reflecting several factors. Raised interest rates/more cautious banks limiting leverage, macroeconomic uncertainties, inflation and input cost trends challenging margins all created a gap between bid and ask. There is typically a lag before valuations adjust and buyer/sellers get on the same page.

We see these factors reducing in H1, enabling more deals to get done. Our focus on UK founder-run businesses seeking to internationalise with an investment partner plays across the economic cycle. Once confidence builds, we see more of this happening. Whilst we don’t expect a surge in H1 2024, we believe there will be a material step-up over next year.

What will be the most important trends affecting your dealmaking in 2024?

Our thesis is to support UK founder-run businesses in secular growth markets to accelerate growth in several ways, e.g., supporting US growth through our US platform, investing in foundational systems and capabilities, refining market positioning and GTM strategies, embedding data-driven decision-making and attracting high-quality management.

While the UK economy may see subdued growth in 2024, we see international growth as a key driver for our portfolio. Entrepreneurs are becoming increasingly discerning about working with experienced investor partners who understand their business and can add real value in a complementary way.

What kinds of deals can get done today?

In our focus area of B2B technology and services, we see the most exciting opportunities being driven by big themes of data and digitalisation, interesting companies finding new ways to help their clients drive better operational and/or commercial performance through software, data and increasingly AI. Founders are increasingly taking on growth capital from relevant, experienced investors who can help them make the most of these market trends.

Regarding end markets, we see huge demand and opportunity for strong value propositions focused on the office of the CFO, pharma services and businesses supporting the circular economy and renewable energy transition.

What were the highlights of your dealmaking in 2023?

We made new investments in two fantastic businesses led by ambitious entrepreneurs: JMAN, an international commercially-focused data consultancy with offices in London, Chennai and New York; and Freemarket, a leading fintech platform for regulated B2B cross-border payments and currency exchange headquartered in London.

In recent years, we have been increasingly aligning our PE and VC investment strategies around key B2B technology services themes, and this is starting to pay off. In our London team, we particularly benefit from the insight to US market technology and investment trends, which tend to be several years ahead of the UK.

What’s keeping you up at night?

We believe we are unlikely to see a major recession. Still, economic recovery and business and consumer confidence are fragile, and we want to see these trending in the right direction in 2024. We need to see the exit markets opening up to bring liquidity to the market. The biggest worry is an expansion of the Ukraine war, conflict in the Middle East or another ‘black swan’ event that could destabilise the global economy.

What are you looking forward to most in 2024?

Our team is looking forward to continuing our support of talented founders and management with international growth ambitions. We also eagerly anticipate a healthier exit market.

Also, 2024 marks 25 years in London for Baird Capital – while that sounds brief in the grand scheme of things, our progress and growth over the last two-plus decades is worth celebrating.

Editor’s note: PE Hub Europe will be running 2024 outlook Q&As with senior private equity dealmakers through December. You can read the previous story in the series with BC Partners’ Mark Fariborz here.