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Italian Private Equity and Venture Capital Association discuss the industry’s deal projections

ed in 1986, the Italian Private Equity and Venture Capital Association (AIFI) is the institutional body the represents Italian private equity and venture capital communities in Italy and abroad. The General Manager of AIFI, Anna Gervasoni, told KITE Invest about the outlook of the PE and VC industries in Italy.

KITE Invest: Please briefly recount the development of AIFI and any major milestones achieved during its close to 30 years representing the PE & VC communities of Italy.

Anna Gervasoni: Since its constitution in 1986, the Italian Private Equity and Venture Capital Association has grown steadily: during the ‘80s the number of members was lower than 30, now we count 110 full members and 122 associate members. Full member’s matrix is quite heterogeneous, including Italian banks, closed-end funds, investment companies, public players and also pan-European or international players. Associate members include accountancy firms, law firms, consultancy groups, institutions and other associations. Nowadays AIFI is the voice of private equity in Italy, considering that it represents almost the totality of private equity firms active in our country. In particular, AIFI works with government entities to improve the legal and fiscal environment, which is undertaking very fundamental changes in recent years, and provides statistics on the Italian market. Since 2014 AIFI represents also private debt players: the new private debt market is becoming more and more important and the Association is supporting the development of new initiatives.

KITE: How would you compare and contract the PE & VC industry to that of the other Southern European PE & VC industries?

AG: The Italian entrepreneurial system is characterized by a strong predominance of small and medium companies. As a consequence, private equity players are mostly focused on mid market, fostering companies’ growth and their internationalization programs. Moreover, private equity in Italy plays an important role in helping the huge number of companies managed by families facing the generational changes. Since 1986 the market has grown significantly: at the beginning the amount invested was lower than 100 million Euro, then it reached 2 billion during the new economy boom and now it is around 3.5 billion. Despite this growth and the important role, the Italian private equity market is still lagging some way behind other important European Countries, especially considering the early stage segment, relatively new and of modest dimension.

KITE: In 2014, 311 investment deals occurred including 106 seed and startup investment, which in total amount to EUR 3.5 billion, up from EUR 3.4 billion in 2013. The number of deals in 2014 decreased by 50 or so deals, but the amount invested increased. Please explain the significance and reasons for this.

AG: In 2014 the amount invested in the Italian private equity and venture capital market was equal to 3,528 Euro million (+3% in comparison with 2013), distributed over 311 deals (-15% on the 368 deals of the previous year), witnessing an increasing average amount invested per deal. This numbers represent the consequence of fact that in 2014 we saw a growing interest of international private equity players in our Country. These players, which in the past years have been strongly affected by the financial crisis reducing their activity, invested last year almost 2 billion in Italy (making investments in some large Italian companies). On the other hand, the end of the public measure for venture capital in Southern Italy caused a slowdown in the early stage activity, affecting the number of investments.

KITE: What are the projections for the number of deals, types of deals, and deal size for 2015 and next year?

AG: The Università Cattaneo Private Equity Monitor Index shows for the first quarter of 2015 a good level of activity in the Italian private equity market, with 21 new investments made by private players (not including the early stage segment), and this is an encouraging sign for the trend of the year. It is important to note that buy out deals represented 85% of the total number, with a growing importance in comparison with the previous years. Moreover, we expect an important role of international players also in 2015: in the first quarter they made 48% of the total number of deals, confirming the renewed interest for Italian companies.

KITE: In what sectors have you seen continued investments occurring? Where do you expect growth to occur?

AG: Historically, the traditional sectors attract the greatest number of investments, in line with the structure of Italian economy, where the 4Fs of Made in Italy (food and beverage, furniture, fashion and fabricated metal products and machinery) represent the most important industries. In recent years we have also seen a growing importance of the energy and utilities sectors, that has been the first sector in terms of number of investments in 2010-2012 period. Moreover, non-financial services and computer related sectors are attracting an increasing number of investments: in the last 2 years they were the main targets of private equity and venture capital investments. We expect that these non-traditional sectors will continue to grow in the next years.

KITE: The EXPO took place in Milan during the first week of May and VC & PE representatives joined the AIFI to provide information about the industry. How do events like EXPO or Annual Meetings in your opinion provide a sense of what can be expected in terms of investments and trends?

AG: EXPO is very important for Italy and in particular for Milan: this kind of event can play an important role to attract not only people, but also the attention of international investors on the Country and its activities. During the first week of EXPO, AIFI participated to Plast 2015, the largest exhibition of the year, in Europe, for the plastics and rubber industries. Within these days, representatives of mid-market, venture capital and private debt committees had joined AIFI staff to animate an information point in order to provide start uppers and entrepreneurs details on the industry. This is very important to increase the awareness and understanding of these financial industries, which represent one of AIFI’s objectives.

KITE: Lastly, is there any announcement or message AIFI would like to deliver to investors, entrepreneurs and / or startups about the Italian PE & VC industry?

AG: The Italian entrepreneurial system is characterized by a huge number of healthy innovative small and medium sized companies, often family owned, that need to grow and become international. Private equity and venture capital can be an important source not only of capital, but also of know-how and experience and many studies demonstrate that private equity backed companies achieve better results than other companies in terms of employees and turnover. The current economic environment, coupled with historical characteristics of Italian companies, highlights that the need of private equity intervention is strong and higher than ever, so there is room for private equity, venture capital and private debt to grow in the next years.

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