Italian private equity value almost halved

Italy has seen a 45 per cent drop in the value of investments in the first half of 2003 compared with the same period last year, though the number of deals has remained steady.

A near halving of deal value has afflicted the Italian private equity market in the first half of 2003, even though the number of deals has stabilised.

In the first six months of the year, 148 transactions worth E591m were completed, according to the latest figures from the Italian Private Equity and Venture Capital Association (AIFI) and PricewaterhouseCoopers Transaction Services.

The figures are in line with a fall-off in the number of large buyouts throughout Europe. Recent statistics from the UK’s Centre for Management Buyout Research (CMBOR), for example, showed total value heading for a six-year low in 2003.

In terms of stage of investment, expansion deals are the most popular in Italy, with 68 transactions worth E326m in the first half accounting for 47 per cent of the total number and 55 per cent of the total amount. The buyout market saw 19 transactions worth E120m, representing a small increase in the number of deals but a fall in market share to 13 per cent from 25 per cent in the first half of 2002.

In the venture capital segment, the number of start-up investments fell 33 per cent to just 33, worth a total E29m, while 27 follow-on investments were completed worth E115m.

The survey draws attention to the fact that Italian private equity firms are becoming increasingly international in their outlook, with a growth in deals targeting non-Italian enterprises. But within Italy there appears to be increasing parochialisation, with the northern regions accounting for 90 per cent of deals by number and 95 per cent by amount in the first six months. The central regions saw 8 per cent of deals by number and 5 per cent by amount, while the southern regions saw a mere 1 per cent of deals and 0.2 per cent of total value.

Despite the low level of investment activity, some positive signs were seen in the fundraising market. During the six months, new capital flowing into Italian private equity funds totalled E1.1bn, with E840m raised by independent funds focused on the Italian market and 70 per cent of the funding coming from international investors. Total funds raised were ‘well above’ the 2002 figure according to the survey. Pension funds, insurance companies and funds of funds all increased their commitment during the period.

Exits increased from 59 to 67, but delivered total proceeds down 23 per cent at E224m. Trade sale was the most popular exit route, accounting for 54 per cent of the total by number. By contrast, there was not a single venture-backed flotation in Italy in the six-month period.