The Shifting Sands of Private Capital

The private capital market has experienced ample growth and conversion in recent years.These changes, impacting both international and italian markets, were recently discussed at the uninstall conference held at Assolombarda in collaboration wiht KPMG. The discussions centered on the evolving characteristics and business models of key players in this dynamic sector.

Evolving Investor Landscape

The composition of capital pools and the nature of institutional investors are undergoing important changes. Globally, traditional investors are increasingly allocating capital to option assets. Together, private wealth, managed through asset managers and family offices, is gaining prominence. According to a recent report by Preqin, alternative assets under management (AUM) are projected to reach $17.2 trillion by 2027, highlighting this growing trend.

In Italy, attracting capital remains a complex endeavor, despite positive market performance. The collection of capital and institutional investors have undergone transformations over time… In Italy, though, the collection remains the most complex part, even if there are positive signals and the performance of the market are very good, noted Cipolletta, president of AIFI.

Specialization and Expansion in the Italian Market

The italian private capital market exhibits a trend towards sectoral specialization.Approximately 24 domestic private equity and venture capital firms are focusing on specific thematic areas, with half concentrating on the technology sector. This specialization allows for deeper expertise and targeted investments in high-growth areas.

Moreover, the market is witnessing an expansion of offerings, with 15 new operators recently broadening their asset classes. Some are evolving into multi-depth platforms, providing a wider range of investment opportunities. Notably, nearly all major asset managers are now involved in alternative investments, indicating a growing acceptance and integration of private capital within mainstream investment strategies.

Global vs. Italian Scale: A Tale of Two Markets

Globally,fundraising efforts are yielding substantial results. The five largest private equity funds raised over €100 billion between 2022 and 2024. Many private capital managers, notably those of American origin, now oversee assets exceeding $100 billion. This concentration of capital reflects the increasing scale and sophistication of the global private equity landscape.

In contrast, italian operators tend to be smaller in scale, with over half managing less than €200 million in total. This difference in size highlights the distinct characteristics of the Italian market, where smaller, more agile firms often focus on niche opportunities and local expertise.

Market Dynamics and Future Outlook

In 2024, declining inflation and interest rates created a more favorable surroundings for mergers and acquisitions (M&A) globally. In private equity, the values ​​of investments and outputs have increased, and mega-deals have returned, observed Stefano Cervo, KPMG partner and Head of Private Equity. However, exit activity remains at a ten-year low, creating pressure on investor distributions.

Despite macroeconomic and geopolitical uncertainties, the availability of liquidity and the pipeline of assets expected to come to market offer a moderately optimistic outlook for 2025. The ability of private capital firms to navigate these challenges will be crucial for sustained growth and investor returns.

Investment Size and Strategic Focus in Italy

The Italian market is characterized by a diverse range of active players, reflected in the varying average investment sizes over the past two years. Domestic private equity firms typically engage in smaller transactions, averaging €16 million, focusing on SMEs, often family-run businesses, that require growth capital and internationalization support. These investments frequently enough target companies with strong local roots and potential for expansion.

International operators, conversely, tend to invest larger sums in more structured companies, with an average investment of €55 million. American firms, having grown significantly in recent years, invest an average of €104 million, while Anglo-Saxon firms invest an average of €84 million, with a reduced presence compared to the past. french firms are increasingly active, targeting the mid-market with an average investment of €32 million.

Venture capital operations average around €2 million, while infrastructure investments are generally larger, averaging €175 million. In private debt, Italian operators invest an average of €8 million, compared to €40 million for international operators. This disparity underscores the different investment strategies and risk appetites of domestic and international players.

Meeting the Diverse needs of Italian Industry

This heterogeneity, both as regards the types of activities that the dimensions of the interventions, is essential to respond to the different needs of the Italian industrial fabric, concluded Anna Gervasoni, general manager of AIFI. The diverse range of investment sizes and strategies is crucial for addressing the varied needs of the Italian industrial landscape, from supporting small family businesses to funding large-scale infrastructure projects.