Italian investment bank Mediobanca is in talks to expand its private equity business with a E1bn alliance with US private equity house Carlyle Group.
According to a report in the Financial Times, Mediobanca plans to commit up to E1bn to a fund which would invest in mid-market management buyouts in Europe. The commitment would be one of the largest ever made by a single institution into a third-party private equity fund.
The two firms are yet to sign an agreement, with one of the stumbling blocks centring around current Italian law, which prevents banks from owning 15 per cent of another company without approval from the Bank of Italy. It is reported that Mediobanca could bypass the regulator by moving its holding in the fund into a separate entity.
“The deal could make sense for both parties as Mediobanca has a good network of investors and Carlyle has a strong investment team in Italy,” said one source familiar with the Italian market. “But it would seem more feasible that Mediobanca would become a cornerstone investor in Carlyle’s next [E3bn European] fund, which is expected to have a bigger allocation to Italy.”
If the two firms agree to form an independent fund, it will compete with a number of established funds which are currently on the fundraising trail. Claudio Sposito, chief executive at Fininvest, is planning to raise E1.1bn, while B&S Electra is reportedly faring well with plans to raise E500m.
A number of international firms, including Terra Firma, French firm Sigefi and Barclays Private Equity have identified Italy as a growth market for 2003. However, there remains, according to one source, “a significant overhang of capital that remains to be invested in Italy”. The bulk of Italian activity remains focussed on family-owned businesses in the small and mid-market sector.