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29 may 2009

Among crisis and dossiers, how the M&A advisory changed

immagine Among crisis and dossiers, how the M&A advisory changed

The Italian M&A sector is not immune to global crisis: reports of the first quarter of 2009 show a substantial decrease in closed deals number (-42% compared to 2008), while the overall value dramatically plummeted to less than € 3bn (-87%, source KPMG). «Except for the recent transactions closed by Fiat and Enel, big operations were left at the starting post» says Davide Milano, project manager at Arietti & Partners – the Italian team of M&A International Inc. «The lack of credit from banks bottled up all those megamergers mainly based on financial leverage. The crisis tsunami smashed up rapidly and sensationally big-size operations. However, the rolling wave hit the mid-market a few quarters later, as we noticed a downturn in closed deals only in the last months».

Despite the considerable decrease in closed deals, the M&A sector is anything but still. According to Giovanni Panigada, project manager at Arietti & Partners: «after exchanging views with our international colleagues, we are more and more convinced that although on the one hand the number of closed deals fell, on the other hand there are more operations under negotiation than ever. Dossiers are not lacking, but nowadays it is harder to find an agreement among the parties».

The main causes are the stock-market shock and the higher prudence of banks that, after the failure of Lehman Brothers, paralysed the Private Equity world, pinned down or urged to redefine a number of M&A transactions already in place. That situation significantly affected the multiples applicable to mid-size M&A transactions. Lower multiples led to reductions hard to understand (therefore not accepted) by sellers, widening distances between offer and demand.

Nevertheless, companies are still remarkably interested to growing by mergers and acquisitions, especially in the mid-market. The peculiarity of the “Italian System” underpin this trend, as Davide Milano confirms: «since the majority of Italian companies are SMEs, M&A advisors like us currently have to handle more projects than ever before. That is due to the particular economic situation we are living in, with some entrepreneurs aiming at the exploitation of market opportunities, while others are just looking for support, for a partner that could help them to overcome current difficulties rather than selling their businesses. This is how the way of doing M&A has changed».

In spite of the alarming reports of the first quarter, the first signs of recovery are already visible. «After the fist critical months, the upturn in the stock market helped operators to narrow the gap between the parties: buyers and sellers are now getting used to this new scenario, eventually coming to satisfactory agreements» affirms Giovanni Panigada. «After the slowdown of the first months of the year, now there is room for a gradual increase in successful M&A deals».