There were just 268 M&A deals announced in Italy in the first half of 2019, recording a 53.8% drop according to Mergermarket data.

The trend is reflected in most European countries which have registered depressed M&A figures this year. Macro concerns around Brexit have hampered UK M&A volumes. Even historically resilient markets have not been immune to the slowdown, according to the latest data from the Nordic region and trends in Germany. 

However, the dealmakers we've spoken to believe that investors are now familiar with Italy's political state and can be optimistic about pockets of activity in the second half of 2019. 

1. Inbound interest

Larger Chinese investments are expected to flow into Italy due to a deal signed between the two countries that will take Italy into the Belt and Road initiative infrastructure-commercial project between China and Eurasia, Elio Milantoni of Deloitte said.

Energy and infrastructure, alongside digital media, will be among the most watched sectors for the coming months, global head of M&A at UniCredit, Pietro Rey said, adding that industrials and consumer are also poised for further M&A activity.

2. Small is beautiful

Generally speaking, the second half of the year could generate smaller deals in greater volume across a range of sectors and attract a hungry private equity community on the lookout for assets valued around the €200m mark, according to Pietro Fioruzzi , a partner at Cleary Gottlieb in Milan.

The industrials and chemicals sector dominated deal count having been part of 75 deals throughout H1. This was followed by consumer (47), and pharma, medical and biotech (PMB) (24), according to the data.

3. Private equity boost

Last year, inbound private equity and venture capital investments reached their highest levels ever and are set to become increasingly significant to the Italian market over the coming months, Pier Francesco Faggiano, an M&A and capital markets partner at Dentons, said.

The contribution of Italian and international private equity will have added relevance during H2, dealmakers agreed. The interest of financial investors in food and wine, manufacturing and packaging companies is expected to thrive among private equity houses, Milantoni said.

4. Listings lift spirits

Strong levels of ECM activity characterised the Italian Stock Exchange's AIM platform, which saw 14 IPOs take place during 1H19. More are listings expected on the segment dedicated to small and medium firms until the end of July.

The approval of the government's decree on innovative SMEs will push more investors towards the AIM Italia platform and favour new IPOs, due to fiscal incentives for those investing in them, according to Anna Lambiase, CEO at consultancy IR Top.

Overall, 2H19 is set to be dynamic and prolific for ECM activity, despite the uncertain political scenario, Antonella Brambilla, M&A and capital markets partner at Dentons, said. 

Italian entrepreneurs are increasingly seeing a stock exchange listing as a concrete alternative to the classic banking financing, although listing companies should be granted more cost benefits, Brambilla said.

Mergermarket's Italian M&A and Private Equity Forum takes place on 6 November 2019 at Principe de Savoia in Milan. You can register your interest to receive more information here: https://events.mergermarket.com/italy/contact