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The Italian M&A market

This article by AIFI – The Italian Venture Capital Association looks at the evolution and growth of the Italian M&A market through to 1999. It also provides details of the most important M&A transactions of the year.

In 1999 the number of completed M&A deals in Italy topped the number of 692 with a seven per cent increase on the previous year. The number of transactions in the last quarter, 192, is striking and this contributed to a substantial rise in the aggregated value of the M&A transactions.

The total value of M&A transactions doubled in 1999 from approximately €71bn in 1998 to a current €145bn. The stunning increase is also due to the public offer on Telecom Italia shares (€31.5bn).

The evolution of the M&A market in Italy developed on a path much like the one already envisaged in the EU and in the US. The most dynamic sector has been the one including telecommunications, high tech and internet. The 82 transactions completed in 1999 put the technology (IT/TLC) sector in first place by number of operations in Italy. Two traditional leading sectors in mergers and acquisitions - mechanical and banking, rank second and third respectively.  In 1999, a notable evolution also characterised the clothes and textiles industry.

The evolving regulatory framework for mobile and fixed telecommunications services in Italy allows for new opportunities in a more competitive scenario.  This has been the major driver for the interest of local and international TLC operators invest in Italy (Olivetti on Telecom and Mannesmann on Oliman).

M&A annual transactions 1995-1999

The IPOs of internet companies engaged in high growth potential businesses such as e-commerce and trading on-line, have also had a great impact. Among the most important were Tiscali, Finmatica and Opengate.

The industry breakdown reveals, as already stressed, the leading role of M&A in the IT sector while, on the other hand, banking, financial services and mechanical (engineering) kept their place in the top five industries.

Sectorial distribution of major M&A transactions

The mechanical and electronics sector confirmed its leading role in the Italian M&A market. Fiat Group and other large multinational groups completed a number of acquistions of middle to large Italian companies, such as the New Holland acquisition of Case and Deutsche Morgan Grenfell's purchase of 80 per cent of Piaggio.

As the tables show, the restructuring of the Italian banking system gained momentum in 1999. At the end of the year, as a result of the merger of Banca Intesa, the largest Italian banking group was formed. Although only 79 transactions were completed in banking, 14 of them had a value larger than €500m and three are among the top ten acquisitions of the year.

Most of the transactions in the financial sector last year concerned the disposal of minority shareholdings by some of the most important industrial holding companies, Gemina, Compart, Hdp and Bell. The clothing and fashion industry was extremely dynamic in 1999 with an unexpected number of acquisitions and listings on the stock market. The Prada Group successfully completed several deals such as the take-over of Church's and the tender offers on Jil Sander, Helmut Lang and Fendi. Luxottica (spectacles and sunglasses) acquired the glasses division of Bausch & Lomb.

1999 — The most important M&A transactions

The cross-border analysis of the M&A transactions casts some light on the race towards an increasing integration of the EU companies and a global vision of the competitive process. The Italian companies perceive more external growth via acquisitions as the primary strategic option to gain new markets.

That is confirmed by the sharp increase (56 per cent) of outward Italian investments in 1999. Italian companies first invested in the EU, 72 per cent of the overall operations concerned EU-based enterprises. The top targeted countries by Italian firms have been France, Germany, Spain and the UK. Nearly half of the non EU Italian acquisition deals went to the USA with almost €7bn value invested (Case, Host Marriot, Bausch & Lomb, Pico). The sectors in which Italian companies concentrated are IT/TLC, mechanical, food and beverage, banking, textiles.

In 1999 inward investment to Italian companies stemmed from the US, Germany (a traditional investor for Italy), the UK and Switzerland. Foreign companies for their acquisitions targeted the IT/TLC, banking, mechanical and financial services. The buying operation by Mannesmann of Germany on Oliman (Omnitel and Infostrada) is among the 1999 top ten operations by value: almost €8bn.

The Italian Venture Capital and Private Equity Association (AIFI) promotes, develops and represents institutional, venture capital and private equity activity in Italy. The organisation is composed of private equity and venture capital investors who purchase, manage and divest unquoted companies.

© AIFI 2000