Private equity, focus on ESG and innovation

Growing attention to environmental, social and governance dynamics, as well as a greater focus on active portfolio management and adaptation to new emerging opportunities

The prospects for the sector private equity and venture capital in Italy for the first half of 2024 are characterized by a strengthening optimism, despite ongoing macroeconomic and geopolitical challenges. According to the forty-third edition of the private equity survey by Deloitte Private, developed in collaboration with Aifi (Italian Association of Private Equity, Venture Capital and Private Debt), operators show greater resilience and less sensitivity to adversity, focusing their attention on trends transformation and government incentives.

During the second half of 2023, the number of deals fell to 239 compared to the records of 2022, but is up compared to the first half of 2023. Despite the decrease in the overall value of deals, which stands at approximately 13.9 billion of Euros compared to 55.1 billion in the same period of 2022, optimism remains strong.

Deloitte study on the first half of 2024 in Italy

The Deloitte PE Confidence Index 2024 marks a slight increase, reaching 107 points, predicting 240 deals for the first half of 2024. Around 75% of operators expects an improvement or stabilization of the Italian economic environment in the next six months.

Although the optimism indicator is in line with the previous semester, there is a significant increase (36.2%) of operators who plan to engage in portfolio management activities for 2024. On the contrary, the share of operators who will focus on exit activities drops drastically to 1.7%, reflecting caution in selling investments, also supported by data on declining market multiples according to 67.3% of those interviewed.

The New opportunities in the sector are increasingly influenced by environmental, social and governance considerations, with 16.9% of interviewees considering these strategies as the most relevant element in the investment evaluation phase. This highlights the growing importance of ESG as a value creation tool in the medium to long term.

The report shows a growing interest in operations supporting MBO/MBI (Management Buyout/Management Buy-In) and a decline in other types of operations such as LBO/Replacement and Expansion Capital. Furthermore, interest in sectors such as Industrial Products, Food & Beverage and ICT shows a decrease, while it grows significantly for Consumer Goods.

The geography of investments sees a return of preferences towards Northern Italy (86.2%), with an increase in interest in foreign investments (6.9%). Despite an unchanged cost of debt, there is a decrease in the use of leverage, with 94.8% of operators reporting having used less than 4x leverage in H2 2023 acquisitions.

In response to a decrease in available bank debt, 20.8% of respondents indicate that they will turn to private credit funds as an acquisition financing tool, attesting to the growing importance of alternative financing sources in the sector.