How is the generational transition of Italian mid-caps managed, usually family businesses managed by the founders who are now over 60? Private equity funds take care of it. Whether they are Italian or – more often – international, 2018 was the year of the boom in operations with Italian medium-sized companies, both in terms of number (149) and overall value: 17,6 billion. This was revealed by a report presented in Milan by the Gatti Pavesi Bianchi law firm and created in collaboration with Unquote, the financial analysis company of the Mergermarket group. The 2018 figure is certainly "doped" by the maxi deal by Recordati, whose absolute majority stake was taken over by CVC Capital Partners for 3 billion, and by the one that saw Italo switch to the American fund Global Infrastructure Partners for almost 2 billion . But the trend to "wean" companies, letting them blossom into the hands of often foreign funds, is also continuing in 2019, with smaller figures so far but with 70 deals in the first half alone, therefore in line with 2018.
The reasons for this surge in private equity? Mainly three: an opportunity for Italian companies to free themselves from aged management and family successions that are not always up to par; the possibility for these companies, above all manufacturing, which despite representing the winning side of Italy (in the years of the crisis, while the GDP stagnated, Italian industry grew by 17% and exports almost half of the products, making the Belpaese the first European country and fifth in the world for trade surplus), to relaunch investments, which are the only sore point of a panorama – that of the Italian productive fabric – which has continued to run despite everything; the possibility for private funds to acquire quality and successful companies at convenient prices.
“For the biggest companies, the large caps – he explains Gianni Martoglia, equity partner of Gatti Pavesi Bianchi – usually the offers are very high, because this is a 'seller-friendly' rather than 'buyer-friendly' market: there are many bidders and few transactions (in 2018, out of a total of 149, only a dozen concerned large companies, ed), so the valuation comes to be 11-12 times the Ebitda. However, the same is not true for mid caps, which are valued at only 8 times EBITDA. This is an Italian anomaly: in Northern European countries, but also in France, mid caps also attract offers equal to 11-12 times Ebitda”. Is the problem, as usual, political uncertainty and Italy-risk? “Actually in Italy there are two worlds that coexist: The broader economy is stagnant, but manufacturing (representing 28% of 2018 private equity deals, accounting for 33% of total value) is healthy. The funds take home a good product that already has a good market. They take care of the rest (investments, technology, etc.), intervening on the management of the company and on investments”.
So, killing children unable to raise: entrepreneurs of medium-sized family businesses, over half of whom are over 60, are starting to cut the umbilical cords. “The demographic change within family businesses in Italy – continues Martoglia – has created the need not only for new leadership, but also investors who can help them protect their legacies and navigate globalization and digitalisation. Globalization allows heads of families to diversify their holdings even outside Italy, in a less favorable period given the political instability. In this sense, private equity are ideal partners”.
The 10 biggest deals of 2018, in addition to the aforementioned Recordati and Italo, have however also seen some Italian companies as protagonists: for example the RTR utility was taken over by F2i for 1,3 billion, for Alpitour instead Tamburi Investment Partners offered 470 million, while Investindustrial has almost 300 put on the plate for Italcanditi.
