Italy 2025: Private Capital, Trends and Strategies

by Alessandro Campo

“Of the approximately 200,000 organized companies we have in Italy – to be clear, those with more than 10 employees – less than 500 are listed, 2,200 are held by private equity, 800 have recourse to private debt. So for the vast majority, the level of openness of their capital is still very low”. This is Innocenzo Cipolletta, president of AIFI, the association that brings together private equity, venture capital and private debt operators active in Italy.  And the figure gives cause for thought, all the more so because the capital market has always been an essential resource for companies, whatever their sector or size.

The current scenario, characterized by inflationary pressures and considerable geopolitical uncertainties, risks slowing down the economic development of medium and small companies, since it is precisely SMEs that have the greatest difficulties in accessing sources of financing, especially if only traditional supply channels are taken into account. In recent years, access to ordinary credit has become much more difficult for companies in general. Bankitalia has repeatedly noted that the tightening of the criteria for granting business loans, together with the many negative events that have occurred in recent times (the pandemic, international conflicts and the consequent increases in the prices of electricity, gas and other utilities, etc.), which have increased the risk level in many sectors, have led to a further tightening on the part of banks and credit institutions. Difficulties in access to ordinary credit also arise from the fact that the entire banking system – both as a result of current regulations at EU level and due to the need for greater transparency in disbursement procedures – has increased the level of information required from companies, both in terms of quantity and quality.

On top of all this, there is a completely new macroeconomic framework, full of risks and opportunities: Gregorio De Felice (Chief Economist of Intesa San Paolo) explained this months ago at the Finance Community Week in Milan: “The post-Trump era (fossil fuel policy and new trade policy, etc.), as well as the influence on the monetary policy of the central banks in the b/t (arousing optimism at the FED and uncertainty at the BEI), may lead to a shake-up for Europe to make important strategic choices (incentives for investment and consumption, more technological innovation and pragmatism on energy cost reduction targets), while avoiding – or pushing away as much as possible – the risk of political and economic decline in favor of the US and China.”

It must be said that, at least in Italy, it is hoped that the slight increase in employment recorded at the end of 2024 will lead to an increase in consumption for the second half of 2025 and that the PNRR will support investments, despite the fact that the accumulated delay in typical public investments is high so far.

On the IPO side, the total capitalization in 2024 increases by about +€0.5 billion compared to 2023, partly due to the fact that only 10 companies left Euronext Growth Milan compared to 21 new listings. The high number of new listings shows that, despite the overall negative performance of the period, there is a strong demand for Italian companies wishing to sustain growth by opening their corporate structure to a particularly resilient listing market.

Last January, Monica De Crescenzo of Il Sole 24 Ore summarized experts’ forecasts for alternative capital to support mid-sized companies: “2025 could mark a turning point, reversing the negative trend of private equity in the mid-market and returning to year-on-year growth in inflows. Investment activity in Europe is already showing signs of recovery, with estimated growth of 25 to 30 percent last year. “If this momentum is reflected in middle market fundraising, capital raised could return to 2022 levels, while remaining below the 2021 record,” according to the Pitch Book report. Longer term, however, trends point to continued growth in assets under management in the private equity industry, thanks in part to new types of investors who have begun to allocate some of their capital to the asset class.

Meanwhile, January 2025 closed with very good signs, at least for Italy: as many as 33 first-time investments of the year were made by private equity funds (34 in the previous January).

But what kind of approach should we expect from investors?

Also during the Finance Community Week in Milan, Walter Ricciotti (Quadrivio Group), in addition to his optimism for 2025, reveals “how technologies and the expansion of the market of operators have transformed the private equity instrument over time from illiquid to moderately liquid, with significant advantages for companies and funds. The industry today favors transparency, both in strategies and in the motivations and objectives of interventions, communicating more than in the past. The industrial component will increasingly prevail over the financial component, and it will be crucial to have a good rate of diversification of skills in the teams”.

What emerges from the debate among practitioners on the outlook for 2025 is that, in any case, the days of thinking only about investing and making money by “buying chips” and then reselling “highs” are over: today it is important to focus on both profitability and sustainable success, prioritizing the enhancement of human capital. To develop a proactive relationship with the entrepreneur, it is increasingly useful to combine humility, “soft” approaches, respect for the background of others’ skills and experience, promoting business continuity as a competitive factor. The key is to “manage without distorting”. Investors today must approach new assets in a “holistic” and gradual way, because a fund (whether private equity or venture capital) is always and in any case a temporary partner, which must show a high degree of flexibility towards the management of the target companies, both before and after closing.

In an interview with Mondo Investor, Filippo Alberti of Andera Partners said: “In 2025, investors will also turn their attention to small cap and lower market buyout funds, with the private debt segment in infrastructure expected to grow. It should be noted that the private capital market has historically been reserved for large institutional investors (insurance companies, pension funds, sovereign wealth funds, etc.), but recently, thanks in part to ongoing regulatory changes, the way has opened for greater “retailization” of the sector with the participation of even small investors. This means even more liquidity to be channeled in the most effective and profitable way.

Italy, in particular, could be a surprise on the positive side: there is still an interest in “Made in Italy”, in technologies and innovations (despite the limited size of the sector), even importing best practices from more developed markets (the US and Northern Europe) and aggregating companies with strong potential to face competitive risks. This is why there is a growing interest in dynamic companies led by entrepreneurs who better understand the importance of aggregation in order to grow rapidly, creating value by focusing first on the human factor: knowing “what to do” but also “finding the right people” to do it. This could then have a far-reaching effect on the entire infrastructure sector: many investors have moved from the individual project to evaluating companies that invest in infrastructure to support growth and sustainability. There are two reasons for this: the current scarcity of projects relative to the cash available as endowment for typical infrastructure funds, and the recent rise in interest rates, which has driven boards to more remunerative investment alternatives.

EY’s 2024 report on venture capital is also optimistic for the near future: in Italy, the billion threshold of capital raised has been exceeded (+7.5 percent compared to 2023), in a European context where investments in start-ups and scale-ups are slowing down.  The top five sectors by value of investment are: Health & Life Sciences, Software & Digital Services, Technology & IoT, Fintech, and Energy & Recycling. At the macro-regional level, Northern Italy confirmed its leadership with €857 million invested, driven by the performance of Lombardy and Piedmont, followed by Central Italy (€227 million) with Tuscany and Lazio, and the South (€43 million) with Abruzzo and Puglia. Lombardy once again emerges as the most fertile and promising ground for Italian start-ups, both in terms of the number of deals (111) and the capital raised by its companies (62.1 percent of the total).

It is also interesting to note that the scientific magazine Innovation In Live Science asked three leading venture capitalists (Pietro Puglisi of Claris Ventures, Lucia Faccio of Sofinnova Telethon and Barbara Castellano of Panakès Partners) about the sectors in which investors’ interest is most likely to be focused, and few doubt it: biotechnology and preventive medicine (genetic technologies, cancer and cardiovascular therapies, A.I. applied to diagnostics), precision medicine, therapeutic medical devices, etc..

And what is happening on the debt capital front as an alternative to bank debt? After a clear-dark 2024, Italian private debt is already giving positive answers, convincing operators of a slight change in trajectory towards financing in support of companies representative of infrastructure projects (even better if based on principles of sustainability and beneficial impact on territories and communities) and a greater flexibility of the instruments offered, with particular focus on so-called hybrid capital, that is, anything that combines debt intervention with the provision of equity in the various possible declinations.