Hg’s Alan Cline: Around 250 AI projects underway across portfolio

Hg has around 250 AI projects underway across its portfolio and is already seeing benefits in cost efficiencies and revenue acceleration, Alan Cline, head of North America, told PE Hub in the latest of our 2025 Outlook pieces.

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Hg invested over $7.5 billion in companies over 2024, including AuditBoard, CTAIMA, Cube, Empyrean, Focus Group, Induver, Ivalua and Ncontracts. “I’m not saying we’re back to peak levels, but the last year has seen a healthy number of opportunities come our way.”

London-based Hg invests in European and transatlantic software and services businesses.

The firm has also been busy on M&A for its portfolio, completing over 220 investments in 2024, he added. That is on top of organic growth of 10-15 percent on average.

What were the highlights and challenges for dealmaking in 2024?

AuditBoard provides a software platform for the audit, risk and compliance sector in the US (very much our sweet spot!) with nearly half of the Fortune 500 as customers and importantly, with about 25 percent of their revenue coming from Europe already.

This is a quality business and strong team that was looking to raise capital in the public markets. However, we had followed the business for almost six years due to our focus on tax and accounting software. This started long before I was involved – so we knew the business and sector inside and out by the time it came to talk. At that point, I’d like to think that it was our intimate knowledge of their universe, our operational expertise and unique transatlantic footprint, that helped us persuade the team there that we would be the most value-added partner they could choose.

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The investment was a big one and it has helped cement Hg’s US franchise as a serious player in the minds of the software and investment community over here.

How did the exit market performed in 2024?

Hg is in a beneficial position of being able to hold on to the companies we work with, until the time is right. Our long-term approach means that we can be patient. That said, we have been busy serving our clients with 19 liquidity events since January of this year. As well as several ‘full exits’, we’ve also brought on new investors at team.blue, Septeo and GGW – so quite the active exit year.

GGW deserves some focus here – it is a German insurance group conceived entirely from scratch by the CEO, Tobias Warweg, and Hg’s insuretech team back in 2020. Over four years we’ve brought together over 60 brokers across Germany, to build a group that now has a multi-billion-euro valuation.

Do you see any macro events being challenges or drivers in 2025?

We continue to live in interesting times and it would be foolish to think that we can predict the effect of various global events. What we have more comfort in, is long-term secular trends in software and AI.

At Hg, we continue to see decades-long trends of technology adoption in the workplace – with sectors experiencing different rates of adoption and different opportunity sets as a result.

This will continue. Financial and regulatory pressures will push businesses towards automation and productivity tools, while the advance of hardware technology will provide more and more sophisticated applications. The last great software evolution – SaaS – is still only about halfway adopted across most major industries.

What will be AI’s role in shaping the industry?

We see ‘product-led innovation’ as being one of the most crucial themes for technology businesses right now. Simply put, the businesses that offer the most valuable and modern products to their customers, are the businesses that will see the most growth. AI is inevitably going to be the focus of much product innovation for software and technology companies over the coming years.

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The AI team within Hg is one of the largest teams in our value-creation offering. We’ve been observing and preparing for this shift for a long time.

I can tell you we have roughly 250 AI projects underway across the portfolio and we’re seeing immediate benefits in cost efficiencies and revenue acceleration, with much more expected in coming years. It is still early days.

In the spirit of being a leader in AI and enabling our companies to move faster, we also launched earlier this year our own proprietary suite of Al tools called “Retina”. These tools cover business intelligence, customer prospecting and deal sourcing capabilities. We are seeing strong initial results as they accelerate the practical adoption of AI across the portfolio.

All the ways in which this new technology will be used in business (once the dust settles) remain to be seen, but I know we are giving our companies a head start where they need it.

Which sectors are you most bullish on for 2025 and which are the ones facing challenges?

From a macro perspective, we are at the beginning of another wave of innovation that is very exciting for those prepared to participate in the AI revolution.

From an industry perspective, we are focused on deeply understanding how new capabilities will impact the end customers’ business operations and how specific technology use-cases can, and will, transform their businesses. This differs by industry, but when you think through the implications it is both complex and very exciting to think about the service delivery model changes ahead. Software, more specifically, that has been redesigned to leverage AI within revised workflows, will have very good long-run growth prospects.

This is a roundabout way of saying – all industries will have to revisit their service delivery models. As a result, well-prepared operators and investors should have numerous new frontiers of opportunity that did not exist even 12 months ago!

Finally, as for the overall deal environment, we believe this will be another year that will favor the prepared, proactive and focused investor. The future, once again, is ripe for the specialist and will be harder for the generalist within the software world – all investments will not be created equal in 2025 and beyond.