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Road to Recovery: A Look at Italy-Focused Private Equity – September 2014

by Matthew Morris

  • 11 Sep 2014
  • PE

In recent news, Italian Prime Minister Matteo Renzi commented that the country would not see any substantial economic growth this year, with the economy likely to witness ‘zero growth’ in 2014. Weaknesses in both the German and French economies too have left the three largest Eurozone countries struggling. As Italy enters its third recession in a decade, this blog will look at whether private equity fundraising, both in and targeted towards Italy, has been affected.   

According to Preqin’s Funds in Market online service, there are currently 39 private equity funds that are focusing on Italy, either solely or as part of a wider geographic investment focus, targeting a total of €15.4bn. This is very similar to September 2013, when there were 37 funds in market with the same geographic focus, hoping to collect an aggregate €15.6bn. However, we can see that the Italian private equity market has been performing better in the last two years compared to 2010, when there were only 24 funds in market in September that year with the same focus, targeting €5.5bn.

In 2014 YTD, 13 funds reached a final close with at least a partial focus on Italy, accumulating an aggregate €10bn. For perspective, France has seen 24 funds close this calendar year securing €14.7bn, and 25 German focused funds raising €13.5bn. However, Italy’s figures are still indicative of positive progress, as they have already surpassed the total of €7.3bn raised in the whole of 2013, and have managed to attract the highest amount of private equity capital to the country since 2008, when 44 funds raised €13.5bn.

There have been two funds to close so far this year focusing solely on investments in Italy; Xenon VI and Focus Impresa II collected a combined €212mn. There were a total of three such funds raised in 2013, and eight in 2012. Italy is some way off its peak which was seen pre-crisis in 2007, when €17bn was amassed from 55 private equity funds with at least a partial focus for Italy, and 34 funds with a sole focus on Italy gathered €4.3bn.

Italy-based fund managers have struggled lately having only closed two funds in 2014 so far, collecting an aggregate €100mn. The country’s fund managers had a slow 2013 as well, closing off just four funds, a long way behind the peak of 33 funds in 2007. So while the country has become more attractive for investments, it seems investors have shied away somewhat from putting their cash in the hands of Italy-based GPs.

Preqin’s data therefore suggests that Italy is still behind its largest Eurozone counterparts so far this year in terms of the funds and capital raised that it is looking to invest there, yet there remains a healthy amount of incoming capital for the Mediterranean country from the 39 private equity funds in market. Furthermore, Italy has managed to reignite appetite for investing in Italian companies, attracting the most capital in six years. As the country continues to face real economic challenges however, it will be interesting to see how Italy-based GPs will navigate through the difficulties.

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