Over the last year, the number of Mergers and Acquisitions (M&A) deals in Italy has increased, showing a positive trend compared to the pre-pandemic period (+5.2%) and in the first quarter of 2024 an increase is confirmed (+4.3% compared to the same period in 2023). At the same time, the value of private equity transactions in Italy increased from EUR 1bn to EUR 2.4bn between Q1 2023 and Q1 2024 (+134%), but there was a strong contraction observed in the number of transactions between the end of 2021 and the end of 2023, down from 138 to just 89.
This is what emerges from the report ‘M&A and Private Equity in Italy. Strategic and Market Analysis’ just published by Rome Business School. The research, edited by Francesco Baldi, Lecturer of the International Master in Finance of Rome Business School; Massimiliano Parco, Economist, Centro Europa Ricerche and Valerio Mancini, Director of the Rome Business School’s Disclosure Research Centre, offers a detailed analysis on the dynamics of the last years and the current trends of M&A and private equity transactions in Italy.
In the last five years, in the Italian M&A market, majority transactions prevail (two thirds of the total), involving unlisted European companies, paid for more than half with cash but with an increasing recourse to earn-out clauses (in 26.9% of cases), with a strong conglomerate connotation (especially in the Telecommunications sector). By contrast, vertical transactions are concentrated in the insurance sector and horizontal transactions in the banking industry, says Francesco Baldi.
Taking into account all Italian M&A deals in the period 2019-March 2024 (ORBIS database, Bureau van Dijk), it is observed that the Italian M&A market shows a slow upward dynamic: from 673 deals in 2019, there were 708 M&A deals at the end of 2023, an increase of 5.2%. In the first three months of 2024, there was a 4.3% increase in deals compared to Q1 2023 (from 139 deals to 145).
In terms of value, the comparison between Q1 2023 and Q1 2024 shows a clear acceleration in the aggregate amount, which can be estimated at around EUR 1.6 billion more (+38.1%). Of the transactions conducted in 2019-March 2024, 56.2% took place through cash (678) and 15.8% (191) through the exchange of shares. Looking at the percentage of shares acquired, 1,195 transactions involved an acquisition share of more than 50 per cent, with the majority (884) involving acquisition shares between 51 per cent and 80 per cent. In terms of target company type, 4,096 unlisted (95.9%), 62 listed (1.5%) and 115 (2.7%) delisted companies were involved. In terms of geography, M&A transactions in Italy show a high concentration of European target companies, amounting to 4,020, followed by those in North America (97) and Asia and Oceania (74).
The results show a recovery of the M&A sector in Italy in Q1 2024. The possibility of an interest rate cut by the ECB during 2024 could in this sense support the M&A market, encouraging more investments and stimulating credit to companies, says Massimiliano Parco.
In the period 1 January 2019 – 31 March 2024, M&A transactions in Italy were predominantly conglomerate in nature, with acquisitions of companies operating in sectors or markets different from those of the acquirer: 66.4% of the sample analysed. Those of a vertical nature, in which the acquirer acquires companies operating downstream or upstream of its value chain, were also numerous, 26.4% of the sample. Finally, those of a horizontal nature were only 7.2%, in which the acquirer acquires target companies operating in its own market, i.e. identified among its competitors.
The highest concentration of target companies in the transactions is found in the other services sector. As many as 1,458 companies belong to this sector (35.3%), followed by machinery (15.3%), retail (7.1%), chemicals (6.9%) and electrical (5.5%). The research also notes that conglomerate-type M&A transactions are particularly prevalent in the telecommunications sector (84.8% of transactions), followed by construction (78.2%), other services (73%) and information and publishing (72.7%). On the other hand, the banking sector has a high concentration of horizontal M&A deals (65.9%) and the insurance sector has the highest number of vertical deals (41.3%).
As many as 11 out of 18 sectors show negative performance when comparing Q1 2023 and Q1 2024. Companies belonging to the agriculture (-2.62x), machinery (-2.02x) and metallurgy (-1.59x) sectors show discrete decreases in value, while the food (+0.75x), P.A. and defence (+0.4x) and textile (+1.14x) sectors stand out with above-average value creation from synergies.
Private equity is a type of investment in which parties raise funds to buy shares in unlisted companies. According to ORBIS (Bureau van Dijk) data, the Italian private equity market counted a total of 544 transactions between 1 January 2019 and 31 March 2024. During this period, a downward trend is evident: from the peak of 138 transactions recorded at the end of 2021, there were just 89 transactions at the end of 2023, down 35.5%.
Between 2022 and 2023, there was a contraction of -23.3% (from 116 transactions to 89), while in value terms, the contraction reaches -92.3% (from EUR 61.7bn in 2022 to EUR 4.8bn in 2023). The 2022 figure is, however, marred by two large transactions involving Atlantia (EUR 32.8bn) and Autostrade per l’Italia (EUR 8.2bn). Net of these two transactions, the 2022 value would thus fall to EUR 20.7 billion. More recent data, however, show – as for M&A transactions – a discrete recovery in the private equity market is taking place with an increase in the value of transactions from EUR 1bn to EUR 2.4bn between Q1 2023 and Q1 2024 (+134%).
As regards the type of transactions, 96% were institutional buyouts, 2% 100% takeovers of the target company’s shares, 1% minority transactions and 1% IPOs (initial public offerings). More recent data show that as of Q1 2024, 19 transactions were institutional buyouts, while only 1 was a 100% stake acquisition. In terms of capital resources, the 19 buyouts required the investment of EUR 2bn, while EUR 800m was the amount of the one 100% buyout transaction.
The other services and machinery sectors show greater interest from private equity funds in Italy: during the period analysed, 117 target companies from the other services sector were involved in private equity transactions and 99 from the machinery sector. Good concentrations can also be seen in the chemicals and food sectors with 71 and 55 target companies respectively. The banking and insurance sectors were characterised by the completion of only one transaction each.
The construction sector recorded the largest deals, with a combined total of EUR 42.4 billion. However, the figure is skewed by the two transactions of Atlantia and Autostrade per l’Italia relating to 2022, which largely change the sample distribution. Other services (EUR 13.2 billion) and chemicals (EUR 11.9 billion) follow.
Looking ahead, it is crucial for Italian companies to be alert to the opportunities and challenges presented by M&A and private equity transactions.
In an Italian M&A and private equity market that shows relative dynamism, the growing tendency to delist companies subject to extraordinary finance transactions is a cause for concern: in just over five years, as many as 115 delistings (2.7% of the total) have occurred. Although this is in line with a phenomenon that can be observed globally, it is advisable for stock exchanges and market regulators to adopt strategies to curb it, so that companies can confidently return to looking at the stock market as a long-term destination that can foster their growth paths, concludes Francesco Baldi.