Italy: Buyout activity falls despite stable economy

John Bakie
08 February 2011

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In contrast to other Southern European countries, Italyтs banking system held up relatively well during the financial crisis. But has its private equity industry shown the same resilience?

While Greece has already been forced to seek a bailout from the EU and IMF, and fears continue over the state of the public finances in Spain and Portugal, Italy has rarely been mentioned. The country did not see high-profile banking collapses and state bailouts suffered in other countries, and its economy has seen relatively stable GDP growth. But private equity activity has suffered significantly in recent years, particularly in comparison to Southern Europe's other large economy, Spain.

According to figures from the European Buyout Review 2011, the Italian buyout market has recovered since 2009, with volume more than doubling to 21 deals in 2010, while value increased 73% to €2.3bn. However, Italy's share of the European private equity market has dived to 5.6% in volume terms, compared to the highs seen in 2008, when Italy accounted for 12.7% of deals in Europe.

By contrast, Spain has seen private equity activity remain relatively stable, with buyout deal volume falling only slightly in 2009, to 18 deals from 28 in 2008, and rising to 23 in 2010. Deal value in Spain has also been higher on average, with almost €3.8bn invested in 2010, and an average deal value of €164m.

It's worth noting that, while the Italian economy did not see the substantial slump of other countries during the financial crisis, it also failed to capitalise on the boom years. Average economic growth between at just 1.5% between 2000 and 2007, compared to a European Union average of 2.4%. Historically sluggish economic growth may not bode well for those looking for opportunities to invest in growing businesses. The country is also heavily indebted (the second biggest debt ration in the EU), which may be off-putting to investors, even if it has not yet led to fears of a sovereign debt crisis.

A full review of the Italian buyout market will be published in the European Buyout Review 2011 in March.