An increase in megadeals reveals growing dealmaker appetite within Italy’s M&A market

Dealmaking confidence appears to be returning within the Italian M&A market. A total of US$57.4 billion-worth of deals announced in the first half of 2021 has already overtaken 2020’s annual total of US$52.7 billion.

Deal volume is also on a positive trajectory. A total of 94 deals announced in in the first half of the year almost doubled H1 2020’s total of 48.

M&A activity by value 2011 – 2021 [YTD]
Target location: Italy Bidder location: Global Sectors: All Sectors

Faith in megadeals returns

The sharp uptick in value was due to an increase in megadeals, indicating increasingly bullish sentiment at the top end of the market. Eight deals with a value of more than US$1 billion were announced in H1, compared to just four within this price bracket during H1 2020.

Three of these transactions had a value of more than US$5 billion—the same number within this price bracket announced throughout the whole of 2020.

The string of big-ticket deals in the first half of the year continues the momentum seen in the latter half of 2020, when six were announced in the fourth quarter alone.

Infrastructure tops the value chart

The highest-valued deal announced in H1 was Italian infrastructure firm Atlantia’s US$21.8 billion sale of an 88% stake in toll road operator Autostrade per l'Italia (ASPI) to a consortium of investors led by Italian investment bank Cassa Depositi e Prestiti (CDP).

The consortium also included global PE players such as Blackstone Infrastructure Partners, KKR and Macquarie Asset Management.

ASPI is one of Europe’s largest toll road operators, managing more than 3,000km of toll roads across Italy. The investment aims to support digitization and innovation while providing long-term stability that will benefit both local communities and the economy.

Another infrastructure transaction to make H1’s top five deals was Nuova Argo Finanziaria’s (NAF) bid to acquire the remaining stake it did not already own in Italian motorway group ASTM. Through the US$4.7 billion deal, NAF—a holding company controlled by the Gavio Group and Ardian infrastructure—aims to take the company private, thereby gaining more control over the reorganization of the company.

As a result of such big-ticket deals, the construction sector—which includes road and civil infrastructure construction firms like ASTM and ASPI—generated the highest deal value across all sectors, with a total of US$26.7 billion changing hands. Notably, this figure has already overtaken all annual total deal values recorded for the sector.

Domestic M&A soars

Domestic deal activity has been a highlight in H1, with four of the top five deals of the year taking place between Italian buyers and sellers. A total of 179 deals worth US$46.07 billion took place between domestic firms in H1—overtaking all annual totals since 2007.

The largest of these deals was Italian digital payment firm Nexi’s merger with Milan-based rival SIA, valued at US$6 billion, aiming to create one of Europe’s largest payment companies. The deal is the latest in a string of consolidations within Europe’s paytech space as firms look to take on competition from larger players, and follows the US$8.6 billion merger of French payment rivals Worldline and Ingenico last year.

Global SPAC trend touches Italy

While traditionally a US-focused phenomenon, the SPAC craze has quickly gone global as US-listed SPACs look further afield for high-growth assets and lucrative returns. Europe has become particularly active in this respect, with a string of SPAC mergers taking place in the first half of 2021.

Italy has been no exception, as evidenced by Italian luxury group Ermenegildo Zegna’s merger with US-listed SPAC Investindustrial Acquisition Corp. Zegna is expected to raise US$880 million through the deal, which will see the company list on the New York Stock Exchange.

The deal, which will give the menswear company an enterprise value of US$3.2 billion, will help Zegna fund international expansion and compete with larger players. It follows a challenging year for the company, with revenues falling amid the COVID-19 pandemic.

While US-listed SPACs remain active and most European SPACs are established in Amsterdam, there is a growing number of Italian-based SPACs listing themselves on local stock markets in order to pursue investments. In July, Industrial Stars of Italy 4 listed on Borsa Italiana’s AIM stock exchange having raised €138 million. The SPAC aims to target medium-sized Italian companies with a significant international presence.

Members of Industrial Stars of Italy 4 commented: “We have been certain since 2012 that SPACs are a very effective tool to list Italy’s mid-caps. We hope that our innovations will contribute to the beginning of a new season for Italian SPACs.”

Earlier in May, two Italian business executives listed a €200 million SPAC, named Revo, also on the Borsa Italiana's AIM market. The vehicle is designed to target companies in the insurance sector.

Cross-border comes back

Cross-border M&A has staged a welcome recovery globally since Q4 of 2020, and Italy is no exception. There were 76 outbound transactions in the first six months of 2021, more than in any other first half period since 2007. Total value came to US$11.2 billion over H1, well above the US$2.1 billion seen in the same period in 2020.

The largest of the outbound deals in H1 of this year saw Italy’s Ali Group announce an agreement to take over US-based Welbilt. The US$4.8 billion merger would create the world’s largest catering equipment business and is pending regulatory and shareholder approvals. Other significant transactions include Italian biotechnology firm DiaSorin’s US$1.6 billion acquisition of Luminex, a US-based biotech firm developing medical tests, including tests for COVID-19.

A refreshing outlook

A renewed confidence in megadeals, which began in the latter half of 2020, is a positive indicator for Italian dealmaking looking ahead to the rest of the year. Italian buyers are investing in local firms at the highest level since before the financial crisis, which will help to realize a return to pre-pandemic levels of business growth.

The recovery of cross-border transaction activity will continue to be a trend and an encouraging sign of things to come, demonstrating the power of Italy’s corporates. As Italy gradually emerges from the grips of the COVID-19 pandemic, these positive indicators should spur Italian dealmaking to finish the year on a post-crisis high.

[View source.]