Valentina Za, Elisa Azolin and Elvira Poloina

MILAN (Reuters – DionisioArchiutti saw his father flirt with the idea that he could bring a new shareholder into the family’s business. But he was aware that the 80-year old would have to decide.

He said that Italian entrepreneurs tend to tighten their hold on their businesses as they age, because they fear there might not be a future for them.

Giacomo Carlo Archiutti was able to sell 30% of his kitchen company, which he had founded in 1967 in Italy’s industrial north east.

Before the pandemic, Archiuttis was a unique family that had welcomed an investor from outside to help with succession planning.

Bankers now say that they have been overwhelmed by the requests from SME (small and medium-sized) businesses to review possible deals. These companies face challenges such as supply chain disruption and financing investment investments to stay current with environmental and digital business standards.

Francesco Sogaro, Managing Director of NB Aurora said that the pandemic showed companies how they could be hit by a tsunami and made them more aware that they must deal with generationsal change.

The Archiuttis now have two of Veneta Cucine’s five boards seats. NB Aurora works with the family to guide its growth in a subtle but effective way.

You can’t expect business men of my father’s generation to be able to advise you on what to do. Archiutti stated that the fund’s experience has allowed us to take bolder actions.

Italian family-owned companies are the backbone economy. Nearly three quarters of these businesses are managed by a senior leader over 70, according to Bocconi University’s AUB research centre. But succession is still a serious problem.

GRAPHIC: CEO over 70 years old, https://fingfx.thomsonreuters.com/gfx/mkt/lgpdwxnkavo/Over70.png “We are small and we’re old,” said Francesco Casoli, chairman of AIDAF, the association of family-owned companies, which according to data firm Cerved account for nearly 70% of Italy’s 148,530 SMEs.

Bank of Italy blames clingy owners because they block productivity-driven investments and put off qualified managers.

Some people seem to be willing to give up after the COVID-19 tragedy, which caused over 147,000 deaths in Italy and is the second-worst European toll, behind Britain. It was also accompanied by the worst economic slump since World War II.

“Deals we’d discussed for years but never had the courage or the will to pursue them, suddenly gained traction,” NB Aurora’s Sogaro stated.

For example, the Illy and Vergnano coffee families welcomed minority investors last year to their businesses as they seek international expansion.

COVID CATALYST

Guido Corbetta, AUB Director, stated that fear is the most powerful motivator.

Companies panicked when they experienced a production freeze in the COVID waves. The worst was over, but they were left with high energy prices and limited raw materials.

Nomura’s Italy head, Stefano Giudici in Investment Banking, believes companies that emerge as pandemic winners are able to take advantage of market valuations, which is a good thing, since they can benefit from increased demand, and European Union recovery funds, for their future growth.

He said that these two factors create an opportunity for business owners to profit from.

Veneta Cucine’s 2021 revenues soared by 40% to around 281 million euros. The demand for home furnishings is at its best since the 1990s Archiutti states.

The norm according to banks is for double-digit multiples in corporate valuations.

Last year’s record deal volume of 85.5 billion euros was reached by Italian firms. This year the number rose 122%, consultancy EY reported. However, Omicron, inflation, and other threats pose an additional threat. Private equity transactions accounted for nearly a quarter.

EY estimates that 86% in the 705 Italian mergers and acquisitions last year were conducted by privately held companies.

Join THE CLUB

Private equity companies Deutsche Beteiligungs AG and Gilde Buy Out Partners opened offices in Milan last year to capture more small-sized businesses.

A surge in the demand for private capital has resulted in more club deals. This is a group of small investors backing these deals.

QCapital, a club-deal firm that targets SMEs, has reported meeting with 120 companies since its May start.

Francesco Niutta (one of the founders) said that investment platforms such as ours “are springing up like mushrooms.”

Deal rush is a chance for banks to combine advisory and corporate finance services with wealth management activities for SMEs, allowing them funnel money from wealthy people into their companies.

The foreign banks want cash too.

September Deutsche Bank (DE) – A Bank for Entrepreneurs division has been launched with a team of 30 in Italy. Credit Suisse (SIX) More bankers have been hired in Investment Banking Advisory by Vincenzo De Falco, the European leader.

To defend a patch it has traditionally dominated, Italian investment bank Mediobanca (OTC:) has in the past two years doubled its team of bankers dedicated to M&A for mid-market firms, which it combines with private banking services.

Mediobanca closed 25 of these deals in 2021. This is more than double the figure for 2020.($1 = 0.8867 euros)