Italian private equity

Buyouts

Despite the dramatic collapse of buyout activity in 2009, which was heavily influenced by a bleak macroeconomic environment, the Italian buyout market has undergone a remarkable development in this decade, truly coming of age. In terms of volume, buyouts have seen a steady increase from the 2001 nadir of nine deals to the record level of 75 transactions in 2008. At the same time, total value also rose to record levels, breaching the EUR9bn ceiling a couple of times as Italy recorded several mega buyouts including the take-private of Valentino Fashion Group by Permira in 2007, as well as the secondary buyouts of aerospace engine maker Avio and luxury yacht manufacturer Ferretti in 2006.

Early-stage

The Italian early-stage segment has failed to recover from the burst of the dotcom bubble in 2000. Volume dropped to 10 investments in 2001 and has remained beneath that ceiling throughout the decade. Although a few local venture investors such as Innogest have been established and continue to do deals, the segment is suffering from the same malaise that still grips the broader European venture community: limited LP commitments, the lack of established venture clusters and only a number of serial entrepreneurs. Consequently, total value figures have remained at the bottom end of the scale, hovering around the EUR25m level since 2005.

Expansion

Following the dotcom collapse, growth-capital investments throughout the decade took a backseat to buyouts in Italy. The implications of the crash became apparent in the following years as the number of expansion deals at first halved to 28 in 2001 and further dropped below 20 transactions in the subsequent years. Total value recorded a more dramatic collapse in 2001, contracting by 86% to just above EUR300m. Notably, although 2007 and 2008 did not see a surge in deal activity, value figures recorded a spike due to two substantial investments: in 2007 Permira-backed Valentino Fashion Group acquired Hugo Boss for a total consideration of EUR1.6bn, while Apax Partners, Madison Dearborn Partners and TA Associates invested EUR1.1bn in Weather Investments.

Buyouts by vendor type

The buoyant Italian buyout market is driven by a growing acceptance among private and family-owned businesses that private equity can indeed offer viable ownership solutions. On average every second buyout in Italy is sourced from private or family owners and this ratio has remained more or less constant throughout the decade. What is remarkable though is the surge in the actual volume of such transactions. While only eight buyouts were sourced from family/private owners in 2000, transactions originated from this vendor type recorded a fivefold increase to 42 by 2008. Add to this the increase in secondary buyouts around 2007 and 2008, with 12 and 14 recorded deals respectively, and statements relating to the Italian private equity market as "coming off age" or "maturing" are truly justified.

Deals by sector

Not surprisingly, 60% of Italian private equity transactions in 2000 were completed in the technology sector as the market was not immune to the deal frenzy that had gripped the space at the turn of the century. The subsequent crash in 2001 resulted in limited activity in the technology sector throughout the decade, while at the same time industrial and consumer related transactions saw a proportional increase. While the industrial sector usually figures strongly in such market breakdowns - being made up of a diverse group of subsectors - the rise in activity in the consumer sector is more prominent in the Italian market. Although based only on a small sample due to the little activity recorded so far in 2009, the rise of transactions in the technology sector could indicate a revival.

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• Southern Europe