ITALY Trends and Developments Contributed by: Emidio Cacciapuoti, Giorgio Bobba and Davide Massiglia, ADVANT Nctm
The private equity market in Italy has continued to evolve significantly over the past year, shaped by a dynamic global environment and emerging local trends. Below is an updated analysis of key developments and considerations for 2025. Macroeconomic Backdrop and Market Impact The economic environment remains influenced by the effects of inflationary pressures and monetary tightening policies initiated over the last few years. While the quantitative tighten - ing measures adopted by central banks aimed to reabsorb market liquidity, 2024 saw infla - tion rates stabilise, particularly in the eurozone. However, high interest rates endure, affecting private capital markets by raising the cost of debt financing. In parallel, geopolitical uncertainties, including the prolonged effects of the Ukraine conflict and tensions in energy markets, have continued to impact investor sentiment. Fundraising and Investment Trends The following three areas are worthy of mention. • Focus on technology and sustainability – investments in technology remain a corner - stone of private equity activity, driven by EU development policies. At the same time, sus - tainability has become a critical focus area, with investors prioritising firms that integrate ESG considerations throughout the invest - ment lifecycle. • Impact on first-time funds despite market improvements, first-time funds continue to face challenges with regards to raising capi - tal, particularly in a competitive environment where institutional investors gravitate towards established General Partners (GPs). However, public and semi-public investment vehicles,
such as the European Investment Fund (EIF) and Cassa Depositi e Prestiti, remain essen - tial supporters of emerging managers. • Introduction of continuation funds – a major milestone for the Italian private equity eco - system in 2024 was the establishment of the first continuation fund managed by an Italian Alternative Investment Fund Manager (AIFM) with respect to an Italian asset. In the past, continuation funds were extensively used to manage and extend the life of underperform - ing investments. The market has generally been lukewarm to these types of transactions on account of their “circular” nature. Howev - er, the last few years have seen a substantial increase in GP-led secondaries to help fund managers grow unicorns on behalf of sec - ondary funds. This approach provides exist - ing investors with liquidity while allowing GPs to continue creating value from their best-per - forming portfolio companies. The introduction of continuation funds has added flexibility to the market, offering an additional exit strat - egy and contributing to the maturity of Italy’s private equity landscape. It is expected that 2025 will see a significant increase in the creation and operation of continuation funds. ESG The ESG (Environmental, Social and Govern - ance) agenda has cemented itself as a key pri - ority for the private equity industry. The intro - duction of regulatory technical standards (RTS) under the Sustainable Finance Disclosure Regu - lation (SFDR) has resulted in additional compli - ance requirements for management companies. Key 2025 Updates • Italian fund managers have significantly ramped up efforts to align organisational structures with ESG requirements. These include enhanced sustainability reporting,
285 CHAMBERS.COM
Powered by FlippingBook