DEAL ACTIVITY IN A NUTSHELL
2023 ITALIAN PRIVATE EQUITY
After a 2022 characterised by record performance , 2023 was a more challenging year for the Italian private equity industry . Deal values were severely affected by the disappearance of mega-deals . Deal volume also decreased compared to 2022 but remained above pre-Covid levels thanks to add-ons .
DEAL ACTIVITY IN A NUTSHELL
2023 ended with 390 transactions , down from 439 in 2022 , due to deteriorating macroeconomic conditions and the restrictive monetary policy pursued by the ECB to compensate for the surge in inflation in 2022 . Deal values fell by 71 % in the first part of 2023 , with mega-deals almost disappearing due to the high cost of debt and the reluctance of traditional lenders to finance high leverage . Small and medium-sized deals held up better , with a 28 % contraction .
The volume of deals showed greater resilience and declined by c . 11 % in the year with financial sponsors focusing on add-ons , acquired at a lower multiple than the initial platforms and financed from the portfolio company ' s balance sheet . The buy-and-build strategy is proving increasingly crucial to generate sustainable growth and accelerate value creation by taking advantage of highly fragmented sectors .
NUMBER OF PRIVATE EQUITY DEALS IN ITALY BY INDUSTRY , INCLUDING ADD-ONS , 2019 – 2023 |
# deals |
500 |
27 % |
439 |
( 11 %) |
400 |
56 |
390 |
345 |
15 |
10 |
48 |
65 % |
43 |
36 |
13 |
8 |
300 |
( 1 %) |
15
34
|
6 |
86 |
35
59
|
200 |
211
21
6
12
19
|
209
24
1
6
16
34
|
59
77
|
79
53
|
64
67
|
100 |
60 |
56 |
35 |
|
|
|
16
57
|
16
56
|
76 |
104 |
96 |
0 |
|
|
|
|
|
|
2019 |
2020 |
2021 |
2022 |
2023 |
|
Source : goetzpartners research and analysis |
|
|
|
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So , what can we expect next ?
Fund managers are adopting a wait-and-see approach in the first part of 2024 , but dry powder remains at a historical high level and the urgency to deploy capital is increasing . Moreover , the ECB ' s expected rate cut in the second half of the year could ease financing conditions and fuel larger buyouts once again .
In the current macro-economic environment , we expect long-term value creation to be centred on operational improvements in undermanaged companies , with fund managers interested in sourcing valuable deals rather than exploiting high leverage or multiple expansion . In this challenging and evolving landscape , business advisory plays a crucial role in successfully supporting financial sponsors , challenging investment thesis , giving confidence in the target valuation and identifying priorities to address after closing the deal to accelerate the value creation journey .
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