M&A Trend 2022: decline or growth? Opportunities in Italy in light of the current context

In Italy, as well as in the rest of Europe, powerful measures have been implemented since 2020 to support businesses in facing the pandemic crisis. These measures include moratoriums and the provision of financing with state guarantees (amounting to over 260 billion euros and 150 billion euros, respectively, based on the data from the Bank of Italy). in the economic bulletin n. 2 – 2022, Banca d’Italia has highlighted that The global economic cycle has weakened., Due to the ongoing spread of the Omicron variant of Covid-19, the invasion of Ukraine by the Russian Federation, and the rise in inflation linked to energy price increases and supply-side bottlenecks (as well as the recovery in demand), the global economic cycle has weakened. In addition to these factors, there is a shift in monetary policies, which are increasingly moving towards a gradual increase in interest rates, aiming to curb the rise in inflation.

According to the opinions of the most authoritative observers and experts, the above-mentioned factors are expected to result in:

a decline in M&A activity, which in the described context would be linked to lower valuations and long-term uncertainties regarding investment returns (in the EMEA region, the value compared to the first quarter of 2021 has decreased by 27%, while the volume has experienced an even more significant decline, marking a -31%, according to AIFI data).

an increase in risk for many companies that have benefited from support measures, as there is a concern that they may struggle to repay the liquidity obtained, coinciding with the upcoming expiration of moratoriums.

Given the above, it seems reasonable to anticipate an increase in restructuring operations in light of a significant contraction in M&A activity. However, it is equally reasonable to consider that, in a context of financial stress, liquidity concentration, and decreased valuations of companies, a significant number of opportunities may arise in the market.

Therefore, a simultaneous growth appears likely:

in the centrality of management analysis and control tools, including for the early detection of crises (it should be noted that on June 17, 2022, a draft legislative decree was issued containing modifications to the Code of Company Crisis and Insolvency); and

in the use of M&A as a means of implementing more complex restructuring operations.

To seize these opportunities and trends, the Management Consulting, M&A, and Corporate Crisis Focus Teams at Harpalis support clients starting from process analysis and management control to debt restructuring and the planning and execution of divestment or acquisition operations.

Harpalis is the innovative Italian consulting network that brings together lawyers, accountants, and labor consultants to effectively address market evolution. Through multidisciplinary expertise and an integrated and collaborative approach, they support businesses as a single point of contact to meet the needs of clients.

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