ITALY - Market remains optimistic

Private equity across Europe is to a great extend dominated currently by terms such as delevaraging and recession, and investment activity has slowed considerably. However, in Italy the story is very different. "In the first six months of 2008 investment levels reached 67% of the total 2007 value," Caverni notes, "the Italian market is an attractive one, and the recent LBO of N&W global vending is a sign of this."

Though this optimism is tempered by realism, with many in the industry predicting a slow start to 2009, there is a general consensus that the long term prospects are bright and that the outlook for H2 2009 and 2010 remains positive. "Difficult times are complex, but complexity offers great buying opportunities," asserts Marco Fumagalli, head of 3i Italy, "our best year in terms of returns was 2002, right after 9/11."

However, private equity houses are aware that they will also have to go on the offensive to make sure that their portfolio companies do not become victims of the tougher economic climate over the next 18 months. Buy-and-build and capital expansion in particular appear to be the favourite investment strategies at this time, as they require little to none financial leverage. "Buy and build has always been a value creating tool," confirms Permira's Gianluca Andena, "distressed companies present a good add-on opportunity for young companies in the portfolio, as are good companies facing limited access to funding for growth."

"The picture painted before us is partly grim as we have no indication of when the downturn will end, but it will end and the times ahead present good opportunities for corporate/PE partnerships," adds Claudio De Conto, COO and general manager at Pirelli, "the synergies that ensue from such partnerships will increase the credibility of the deals being made."

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