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Italian mezzanine sets new record

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2007 set A new record year for mezzanine in Italy with EUR684.4m invested, a 57% increase on 2006 and 9x the European rate of growth (6%). Italy now represents 5.3% of the European market and has 20 specialist mezzanine finance players, of which 15 are local firms. According to the Permanent Survey on Mezzanine Finance in Italy, Italian mezzanine finance grew by 256% over the period 2003-2007. Over the full five-year period, EUR2bn was invested in Italy, rising from EUR192.1m in 2003 to EUR684.4m in 2007 and involving 19 deals in 2007 compared with four in 2003.

"The Italian mezzanine finance market is consolidating, both in terms of investments and in terms of players. Even if the multiples in the second half of 2007 have decreased and credit crunch affects the dealflow, the expectations for 2008 are positive," explained Marco Nicolai, lecturer in extraordinary business finance at the Universita Statale degli Studi di Brescia.

In relation to the total private equity market, the survey found that small and medium-sized mezzanine deals (worth less than EUR150m) represented 51% of total amount invested (EUR2.14bn), nearly always for buyouts (79% of private equity deals), 64% of investment, or roughly EUR2.1bn, went into small deals (less than EUR15m) and 30% into medium-sized deals (EUR15-150m).

The survey indicates that mezzanine capital averaged 1.3x EBITDA (compared with 1.5x EBITDA in 2006), representing 19% of the firm's total debt. The main targets for mezzanine finance are large enterprises (more than 250 employees, turnover of over EUR50m or total assets above EUR43m). Over the five years surveyed, the most frequently represented sector was consumer goods, with EUR913m in investments (46% of the total amount invested), followed by transport with EUR746m for 11 deals. This mirrors the situation seen in international mezzanine finance which is known to prefer industries with large cash flows.

The survey was conducted by the department of business economics at the Universita Statale degli Studi di Brescia, which monitors and analyses mezzanine financing deals in Italy.