Nowadays, in a society increasingly oriented towards performance and competitiveness, both workers and companies are confronted with the opportunities and risks that arise from the world of finance. In this context, we hear with increasing frequency of private equity, a sector of finance that often remains enveloped by an aura of technicality, but which has a concrete impact on the Italian productive fabric.
But what exactly is private equity? How can a performance-oriented, financial industry affect companies operating in sectors so deeply rooted in the “Made in Italy” identity?
Recently, I had the occasion to read the report made by AIFI (Italian Association of Private Capital) in collaboration with Quadrivio & Pambianco, which tries to answer these questions. The paper analyzes the effects of private equity investments on Italian companies active in the four key sectors of Made in Italy – food and beverages, furniture, cosmetics and fashion – over a period from 2000 to today. The objective? To understand if and how private capital can support the development of these excellences, without distorting their identity.
First of all, it is crucial to clarify that “private equity” refers to a medium/long term financial transaction through which an investment fund acquires an equity stake in unlisted companies. Firms which benefit from this type of intervention usually have strong growth potential and a natural propensity for internationalization. By providing liquidity, the main goal is to support firms in their path toward modernization, efficiency and valorization, aiming for a financial return through resale or a stock market listing.
The relevance of private equity becomes evident especially when looking at the support provided to entrepreneurs in key procedures such as the management of control systems and performance analysis based on data to which, especially in the family-owned company, is still given little importance.
Thanks to this short definition, we can understand why private equity companies look with interest at Made in Italy firms. These businesses offer strong return potential, as they possess distinctive features which, if further developed, can enhance their competitive position in the market.
At the same time, private equity represents an invaluable opportunity for the majority of small and medium-sized enterprises (SMEs), which predominantly characterize the Italian industrial fabric. These firms, which are often family-run, have the potential to become small multinationals, but cannot become truly competitive if not adequately supported. In actual fact, what makes this type of intervention relevant is not only the size growth of companies, but especially the boost it gives to the internationalization process. Moving beyond national borders means accessing new markets, capturing more opportunities and reaching a wider consumer audience – key elements to compete in an increasingly dynamic global economy.
Over the past 25 years, private equity has invested about 25 billion euros in companies operating in the reference sectors of Made in Italy. Even if, on average, we could talk about 1 billion per year, it is interesting to observe that in the last five years there has been a strong acceleration, with 8.8 billion euros invested.
In particular, 2022 has set a record, with €2.6 billion, while 2024 also confirmed a positive trend, with 2.3 billion, positioning itself as the second-best year ever in terms of capital invested.
These figures highlight the growing interest of both domestic and international funds in the traditional sector of the Italian economy, where companies recognized throughout the world for the quality of their products operate.
But how much are the investments in Made in Italy by private equity?
It is worth noting that 68% of the investments in Made in Italy companies involved transactions with an equity commitment of less than €15 million. At the same time, 28% of the interventions are in the middle band, that is between 15 and 150 million euros, while only 4% are large and mega deals.
However, even if the larger share is characterized by smaller transactions, over time there has been a progressive increase in the weight of medium-large operations, also thanks to the growing presence of international players. Notably, the 15-150 million segment has benefited most from this contribution, becoming increasingly relevant in the overall private equity landscape related to Made in Italy.
So, what role do international investors really play and why does it matter?
The relevance of the international contribution is clear from data on operators active in the period 2000-2024.
Of the 215 entities that have made at least one private equity investment in Italian companies operating in the Made in Italy sectors, almost half are international operators. Following, we find the Italian managers of closed funds, which represent 24%, investment companies (14%) and finally banks and banking SGRs (11%), which played a significant role in the early 2000s in the development of the private equity market in Italy.
In addition to this, it appears that international entities, usually larger in size compared to domestic funds, are those who have invested the largest share of capital. In the last five years, these entities have invested 77% of the total allocated to Made in Italy companies.
What about the role of domestic investors? Are they still relevant?
While international funds dominate in terms of capital, it is important to bear in mind that, in terms of the number of transactions, domestic players have led the way, accounting for 72% of all deals. In particular, 44% of the investments made during the period under analysis were made by managers of Italian closed-end funds, followed by international operators, who contributed 28%.
A fundamental aspect is also the geographical distribution of investment, which faithfully reflects what is generally observed in the Italian private capital market.
Northern regions predominate by accounting for 78% of total operations. Lombardy alone – where most operators are located – absorbed 30% of the total value of investments, followed by Emilia-Romagna with 19% and Veneto with 16%.
As far as the rest of Italy is concerned, the regions in the centre contributed 15%, while those in the south and the islands accounted for 7% of the total.
This data shows that, despite the growing importance of foreign players, the national private equity fabric continues to play a central role in the development and support of Made in Italy companies.
But what exactly is the economic impact of private equity operations on Made in Italy? How can it be measured?
Let’s start by considering turnover as the first key indicator to assess the performance of companies over time. The analysis is based on 311 transactions with available data at both entry and exit, or after three years in the portfolio if the company was not yet divested.
A crucial point here is that, at the time of entry, total revenues of these companies amounted to 22 billion euros which then increased to 35 billion, thus recording an overall increase of 60%.
If we break down the sample by company size, we observe a significant percentage turnover growth of small enterprises (those with a turnover of less than 30 million euro). As can be seen from the graph, in this segment the median turnover rose from 13.9 million to 21 million euros, marking a net increase of 51%. On the other hand, even larger companies show similar growth dynamics, with a variation of 35%.
However, companies’ revenue is not the only pivotal element in assessing the economic performance of private equity transactions. Indeed, higher profits and technological improvement are often accompanied by an increase in the number of employees.
The 332 companies included in the analysis had a total of 92,600 employees at the time of the investment. This number rose to 137.6 thousand at the time of exit or, if it had not yet occurred, three years after entering the portfolio, recording an overall growth of 49%. Finally, an analysis of the data by size of enterprises shows that employment growth is most significant among medium-sized enterprises (those that had a turnover between 30 and 100 million euros). In these cases, the median number of employees increased by 36%. Smaller companies with an initial turnover of less than 30 million saw a 35% increase in employment, whereas large ones – with a turnover of more than 100 million – recorded an increase of 19%.
This shows that private equity not only is able to provide entrepreneurs with the right and adequate tools to improve their market position, but it also creates opportunities for people looking for a job.
What about the future?
The link between private equity and Made in Italy seems likely to strengthen further. The data and evidence analyzed show that this combination has proven, over the years, to be a strategic lever for the growth and internationalization of Italian companies.
Private equity continues to be a catalyst for growth for Italian excellence, helping it not only to become more competitive, but also to bring the value of Made in Italy ever further in the world.
Curious to learn more? Check out the complete analysis “L’impatto del private equity sul Made in Italy” made by AIFI and Quadrivio & Pambianco: https://www.aifi.it/visualizzaallegatodocumenti.aspx?chiave=s6KupLrW5O3Bo02neNgiUO5K7SE5b1
* All graphs featured in this article are taken from the report mentioned above.
