An attractive market, offering a variety of investment opportunities
“More ice cream is produced in Germany than in Italy” – is this a false statement? “The Italian mechanical and plant engineering sector manufactures more packaging machines than the German equivalent” – is this false, too? Following common prejudices makes it very easy to be mistaken. Both statements are in fact correct. If you don’t believe it, please check the references at the end of this text.
As Europe’s fourth largest economy and boasting the world’s eighth highest gross domestic product (2018), Italy is a leading industrial nation. The companies that are mostly located in the north of the country are closely linked to German industrial regions and supply the German automotive industry, among others. Italian industrial companies set the international benchmark in many high-end segments. The supreme discipline of mechanical engineering is the country's most important export sector.
The economic structure that exists in Northern Italy in particular is comparable with that in Bavaria, Baden-Württemberg or North Rhine-Westphalia. These areas in both Italy and Germany are home to a large number of mid-sized companies, most of which are family-owned. Industry commands an above-average share of value creation here, with many companies able to claim technological leadership.
Diverse industrial landscape with established and successful companies
It was therefore not exactly surprising that DBAG had also structured an MBO in Northern Italy in August. After all, it makes sense to transfer a discipline that has been practised successfully for many decades in Germany and the German-speaking neighbouring countries of Austria and Switzerland to other markets too. With this in mind, DBAG’s investment team had started to systematically tap the Italian market and develop a network there. At the outset, however, we were certainly not considering the entire range of investment opportunities. DBAG is here mainly targeting the diverse, established and successful industrial landscape that includes mechanical and plant engineering as well as manufacturers of industrial components. DBAG has structured more than 20 investments in these two sectors alone in the last two decades.
This very sector know-how formed the basis for the conclusion of DBAG’s first MBO in Northern Italy: PM Plastic Materials is Europe’s largest producer of pre-wired and empty cable conduits, used primarily for electrical installations. The fact that DBAG scores highly with its transparent and long history among the partners of family-owned businesses played an important role here. The founding family sold PM Plastic Materials to DBAG Fund VII and to DBAG itself.
Northern Italy’s economic structure is not only attractive and comparable to Germany. There is greater willingness in both countries to open up to private equity – we are seeing an above-average increase in the number of investment opportunities in Germany and in Italy compared with other European countries. The transaction sizes in the relevant market are almost the same in both countries, as is the market volume, relative to the size of the respective economies.
“We are developing new investment opportunities”
However, it was not only the attractive investment opportunities that drew us over the Brenner Pass. “Through the regional broadening of our investment strategy, we will open up more investment opportunities for the funds we advise – in an attractive market”, said Torsten Grede, Spokesman of DBAG’s Board of Management, to mark the investment agreement at the start of August. The prospects for further MBOs in Northern Italy are favourable: there are only a few private equity companies active in Italy with such a strong focus on companies with industrial business models. The close links between the two countries also come into play here: Germany is Italy’s top export partner – from an Italian company’s perspective, this speaks in favour of – rather than against – a private equity partner from Germany.