Italy - catching the cold

While Italian private equity activity continued to grow for five quarters after the start of the credit crisis in the summer of 2007, the crunch finally caught up with the market in Q4 2008 with volume halving to 16 transactions and total value dropping by almost a third to just over EUR1bn. The downward trend continued into 2009, with only 10 deals recorded in the first quarter worth EUR250m (see graph 1).

In particular the country's buyout market slumped to the lowest total since 2006 in the first quarter, with only two buyouts completed worth a total of approximately EUR50m (see graph 2). Over the past year Italy had successfully bucked the pan-European downward spiral of fewer and smaller buyouts. However, the recent collapse in activity reveals that this was merely a lag effect and not evidence that Italy was insulated from the difficulties, and the market has now succumbed to the same valuation issues and credit woes that are affecting other western markets.

Moreover, while the rate of decline in buyout activity throughout Europe (excluding Italy) has slowed down (see graph 3) - volume dropped 50% to 67 deals in Q4 2008 and then by 36% to 43 transactions in Q1 2009 - Italy's slump has been accelerating. Since peaking in the third quarter of last year with 29 transactions worth EUR3bn, the Italian buyout market has shrunk by 60% to 11 deals in Q4 and by a further 80% in Q1 2009. With the usually slow summer season approaching, it is likely that the Italian private equity market will remain in estivation until the winter.

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• Topics
• Investments
• Southern Europe