Lower interest rates drive recovery in the Italian M&A market in 2024
Since the beginning of 2024, the capital markets have experienced a significant return of liquidity to fixed income, driven by lower interest rates and spreads, as well as strong appetite from underwriting banks. On the other hand, M&A activity, which suffered a sharp decline in 2023, began recovering in 2024 with a slight delay compared to the fixed income markets, reflecting the inherently longer timelines typical of M&A processes. A substantial increase in announced M&A transaction volumes has been observed in the second half of 2024, particularly in Italy. During the first nine months of the year, the Italian market was highly dynamic, with a total deal value of approximately €59 billion, representing a remarkable growth rate of +87% compared to the global average of +16%(1). Another key factor behind Italy's strong performance is the increase in the average deal size, offsetting a 10% decline in the total number of transactions during the first nine months of 2024 compared to the same period in 2023. This trend highlights the growing relevance of transformational deals aimed at enhancing growth and competitiveness for acquiring companies.
PRIVATE EQUITY IN ITALY IN 2024
Private Equity plays a critical role in Italy's M&A market, accounting for approximately 40% of total deal value in the first nine months of the year. While this represents a notable annual increase of 40% in deal value, it remains below the historic high of 2022, when PE accounted for nearly 70% of total M&A volumes. On the other hand, the number of transactions involving Private Equity funds has declined (-14% year-on-year), diverging from overall market trends. This slowdown is partially due to the high-interest-rate environment that characterized credit markets over the past two years. The first interest rates’ cut occurred only on September 14, 2024, following a series of increases that began on July 21, 2022. Within this context, Private Equity funds have focused on executing high-impact acquisitions within their respective sectors, emphasizing value creation strategies aimed at improving operational performance rather than relying heavily on financial leverage or multiple arbitrages. Notably, PE sponsors are playing an increasingly prominent role in specific sectors: in Consumer & Luxury, they accounted for approximately 88% of the announced M&A deal value in Italy, while in Energy & Infrastructure, the weight stood at 58%.
OUTLOOK FOR M&A IN 2025
Over the past two years, market stakeholders have dealt with challenges posed by high interest rates, but the outlook for 2025 suggests a full-scale recovery in the M&A sector. Private Equity activity is expected to grow, driven by a more favourable credit environment stemming from recent interest rates’ cuts over the past six months, alongside the expectation of at least one additional interest rates’ cut in 2025, supported by lower inflation.
Further evidence of improved financing conditions includes the increasing appetite from credit markets and specialized players such as Private Credit funds. These stakeholders are demonstrating strong confidence in the economy, as evidenced by declining credit spreads on financing M&A deals.
A stabilizing macroeconomic environment and a normalization of valuation expectations among investors could act as additional catalysts for a more dynamic Private Equity landscape, marked by a recovery in exit transactions and the deployment of further equity. However, some sectors are likely to remain more attractive than others.
Among the key topics expected to shape M&A investment strategies are digitalization and energy transition. Significant transactions are anticipated in the Energy, Infrastructure, and TMT sectors and their related supply chains. On the other hand, the Luxury sector, which has experienced a general slowdown, may present opportunities for consolidation processes to address ongoing global challenges.
INTESA SANPAOLO'S ROLE IN M&A ADVISORY IN ITALY
In this market context, Intesa Sanpaolo’s IMI Corporate & Investment Banking ranks among the leading players in the M&A Advisory activity in Italy. Backed by a solid track-record in the implementation of extraordinary corporate finance transactions, as well as a deep knowledge of financial markets and the Italian industrial reality, IMI CIB supports its customers with a broad and comprehensive portfolio of financial advisory services, both on the national and international markets.
NOTE 1 Fonte Refinitiv/ Eikon, Intesa Sanpoalo elaborations
SOURCE Refinitiv/ Eikon, AIFI