Is Italy for sale or is it hungry for international companies? Who are the predators and who is the pray in the current M&A international scenario? Despite the present economic conditions, the situation has dramatically affected the number of deals closed in the first half of 2009, more and more firms are favourably disposed towards extraordinary operations.
«Actually, in today's market it is misleading to consider a company as a hunter if buying or as a prey if selling its business», remarked Giovanni Panigada, Project Manager at Arietti & Partners. «In the current scenario, hunters are joining forces with others in order to face the crisis; on the other hand, those staying still are jeopardizing their market share and their own existence, consequently they are sitting ducks. For instance, FIAT could be defined as an hunter, but it does not mean it is a buyer. If Marchionne’s plan to merge with Opel had seen the light, shareholders would have lost control of FIAT Auto, therefore they could have been considered as sellers. Nevertheless, there is no doubt that the Turin-based car-manufacturer is playing a leading role in its industry», explained Panigada.
The most active operators, both Italian and foreign, are the ones with sound balances and financial capacity who are willing to take advantage over their competitors by an intense M&A activity. The industrial sector is at the helm: «by chance or by choice, those firms who found themselves into anti-cyclical sectors, such as pharma and healthcare, are not damaged by the economic slowdown and therefore they can think big», said Davide Milano, Project Manager at Arietti & Partners. «Despite some exceptions, the firms suffering the most are usually those positioned in premium and super premium segments, selling products that are by nature non basic essentials. The average customer is becoming more and more careful in his/her purchase decisions because of uncertainty, consequently moving towards low-price products or putting some important purchases ‘on hold’. That switch in consumer choices inevitably affects many industries, from automotive to fashion».
Therefore, companies who benefit from the present situation are the ones directing their attention to ‘careful customers’. «Our current clients are mainly Italian groups with renowned brands and a large product portfolio of non-replaceable goods», affirms Davide Milano. «The most common strategic purposes are entering new markets or consolidating a market share, but also expanding product portfolio and acquiring technologies and know-how. Medium-size companies are the preferred target: in fact, one of the advantages of investing in the mid-market is reducing risks and consequences in the unfortunate case of failure». However, Italy is also full of opportunities for foreign companies: «Many small Italian firms having hard times aroused the interest of international operators. As our clients’ requests confirm, they are looking for established brands, distribution networks, know-how and the ‘Italian genius’».
From which foreign investors can we expect acquisitions in Italy and towards which countries are local groups aiming to grow internationally? «While in the European horizon German companies are the most active ones», affirmed Giovanni Panigada. «Meanwhile some Chinese and Indian firms are showing interest in companies I am currently advising on the sale process: both these oriental countries should no longer be considered targets for international acquirors, they now have many operators looking at Europe as a land to conquer».
Instead Italian groups are pointing at several countries for M&A operations: Spain, France, Germany, United Kingdom, Switzerland, Romania and Eastern Europe, while outside the Europe the most enticing countries are Brazil, India, China and the USA. According to Davide Milano, «In the United States the effects of the global crisis are more severe, exchange rates are favourable for Euro-zone economies and local business mentality is closer to our mindset, making post-transaction integration easier. All these factors favour the interest of European companies, making the USA a country full of new M&A opportunities: the recent agreements drawn there by FIAT are the best example».
Arietti & Partners, as Platinum Sponsor of the G8 Young Business Summit, organised on 2 July 2009 in Stresa, Italy, a panel discussion on M&A as a tool for Innovation, followed by more than 200 bilateral meetings between young entrepreneurs and the advisors of M&A International Inc.
The event, at the Regina Palace Hotel in Stresa, was attended by more than 80 delegates, primarily ‘under-40’ entrepreneurs from Italy and the other G8 countries, Private Equity funds and legal advisors.
A panel of experts from M&A International Inc. took part in “Innovation and Growth through cross-border M&A”, a panel discussion moderated by Manuele Musso (Managing Director of Space 2000). M&A International Inc. was represented by Attilio Arietti (Italy), Hans Bethge (Germany), James S. Cassel (USA), Doru Lionachescu (Romania) e Christopher Scales (Spain).
The key conclusion was that mergers and acquisitions transactions could represent more than a shortcut to innovative processes. By acquiring (or merging with) a company that has the technology, the products, the distribution channels and the market knowledge that it would take years to develop, the acquirer is very often buying nothing but time. Furthermore, when immediate measures need to be taken to innovate, M&A can in fact be the most effective (and the only) option available.
The current economic situation affects the multiples applicable to transactions and company evaluations, leading to reductions diffucult to understand and therefore not accepted to sellers. However, that represents a unique opportunity for those companies interested in international expansion and “acquiring innovation”, taking advantage of lower prices.
Following the debate, Italian and international delegates met other entrepreneurs and M&A International Inc. advisors in 25-minute one-to-one meetings to discuss co-operation projects, strategies and international expansion opportunities. This ‘speed dating’ format has been implemented and developed successfully by M&A International Inc. in eight editions of the M&A Mid-Market Forum, the latest one held in Milan in November 2008.
Attilio Arietti, Chairman of M&A International Inc., declared: “I am glad to have met and to have presented to my international colleagues these young entrepreneurs: they proved to be very dynamic, willing to forge innovative paths and open to M&A transaction opportunities. Bilateral meetings are an ideal occasion to get an international insight into the business strategies of the entrepreneurs we met.”
For further information and a picture gallery, please visit the page dedicated to the G8 Young Business Summit on our website.