PRIVATE EQUITY EXCHANGE - Face à face avec Meritxell Roca Ortega, Stefano Bianchi & Filippo Fiore..

Good morning. We are pleased to welcome you to the second edition of the Private Exchange in Paris, organized by Leaders League, one of the main European events dedicated to private equity. This year the event sees a growing international representation, with particular attention to the European panorama. To offer an authoritative look at the state of the private equity market in Italy, we are joined by the partners of the law firm Pavia e Ansaldo. With us today are lawyers Meritxell Ortega, Fioretti, and Bianchi. Good morning, lawyers, and thank you for being with us. In which sectors is the highest number of investments recorded in Italy?

What makes Italy such an attractive destination for foreign investors?

On this, if I may add, good morning everyone. An important element, referring to what Stefano mentioned about a historical lack of protectionist attitude by the Italian authorities, is that the trend is actually changing in recent years with the so-called Golden Power regulation, or control over foreign direct investments, which is already very extensive in its application. It is seeing a trend of increasingly invasive enforcement by the authorities, and therefore many deals, even in the private equity sector, with institutional and non-industrial investors, are subject to conditions or are prohibited in the name of this regulation. So this is certainly a factor to consider.

What are the main differences between the private equity market in Italy compared to other countries?

Good morning. Comparing Italy with the rest of the world is quite easy. It is a much smaller market in terms of funds and targets, concentrated on small and medium-sized enterprises, with structures fundamentally linked to growth for succession or growth in general. A completely different market from the American and Anglo-Saxon one in general. I often see, working between Italy and Spain with offices in Barcelona and Madrid, that the differences between Italy and Spain are more subtle and perhaps more interesting in this context. Both countries focus on small and medium-sized companies. Italy is perhaps a bit larger, but Spain is growing more at the moment, so it is more interesting as an opportunity. In Italy as in Spain, leverage is very little used; in Spain perhaps even less, so banks are even more reluctant to provide financing. But there is a lot of focus on tech in Spain as a sector, so it is interesting to evaluate. Then it is important to see that bureaucracy and limitations in Spain are not as strong as in Italy. On this, Filippo, if you want to add.

Yes, true, true. And actually another difference to underline, at least at this stage, is that Spain on the control of foreign investments is just beginning, so we are in a launch and shakedown phase, I would say, and the authorities are less attentive, if you will, in the invasive application that instead occurs in Italian territory. So from this point of view, it is an aspect that can be considered a lesser obstacle in the conclusion of deals. But that is not the only difference I would like to mention, out of respect for other jurisdictions compared to the Italian market. An extremely interesting and very relevant element for private equity deals is the new powers of the authority on so-called sub-threshold operations, i.e., operations that would normally not be notified, for which the authority instead has the power to exercise call-in, which adds some uncertainty in the completion of the deal. This is without a doubt, and it arises from an industrial factor, namely trying to counter what were called killer acquisitions in high-tech markets, but which has now been extended to all sectors. So this will also be a trend to keep in mind in deals, no doubt.

Let's talk a bit about ESG. How have ESG criteria applied to investments changed in recent years?

Among these ESG criteria, which are the most complex to implement for funds?

Perfect. Thank you for this pleasant chat here at the Private Exchange in Paris, and see you next time. Thank you, thank you.

Thank you.