Italian M&A Forum: Seizing Opportunities Beyond the Financial Crisis

ITALY M&A FORUMOCTOBER 2009

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Italian M&A forum: Seizing opportunities beyond the financial crisis

Post-event briefing

Lead strategic partners: Strategic partners: Associated partners:

mergermarket

Media partner:

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cOnTenTS

05 chair’s welcome address

06 Keynote address: Italian economic outlook

09 M&A health check

10 Private equity

10 How to get a deal done today

12 Opening address: Afternoon session

12 Overview: The lie of the land

14 corporate restructuring and turnaround management

15 Beating the crisis: The agenda for the future

15 closing Remarks

18 Historical data

Legance is an independent Italian law firm founded in 2007by a group of lawyers who have been working together for over 15 years, advising clients in a significant number ofimportant and complex transactions in Italy and in Europe.

Legance comprises over 130 lawyers, working in its Milanand Rome offices, and has a diverse and extensive practicecovering the following areas: • M&A and Corporate• Banking, Finance and Project Financing • EU, Antitrust and Regulation • Labour and Employment• Capital Markets and Financial Services• Investment Funds• Litigation and Arbitration• Restructuring and Insolvency• Tax• Administrative Law• Real Estate• Energy, Gas and Natural Resources• Shipping, Aviation and Transportation• Intellectual Property Media and Data Protection• TMT (Technology, Media, Telecommunications)• Environmental Law

Legance has established close and strong relationships with the most important law firms worldwide, whilst maintaining an independent position that allows the firm to work with otherforeign legal advisors selected by the client.

www.legance.itMilan, Via Dante 7, Phone +39 02.89.63.071 Rome, Via XX Settembre 5, Phone +39 06.93.18.271 [email protected]

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cHAIR’S WeLcOMe ADDReSS

The Italian M&A forum began with a brief welcome speech by Gian Maria Gros-Pietro, Chairman of the Italy-based transport and infrastructure company, Atlantia, and Head of the Scienze Economiche e Aziendali department at the Luiss University in Rome.

Gros-Pietro began his welcome address by stressing the pivotal role the Financial sector has in the current market system. The sector plays the important role of allocating financial resources, and as we have recently witnessed, if the Financial sector fails, it is imperative that a solution be found.

The efficacy of post-crisis policy decisions also has to be taken into account. Gros-Pietro

pointed to the example of the Bank of England pumping more money into the market last year than in the previous 314 years of its history.

For their part, politicians claim that this liquidity has never reached the real economy and many market operators are now wondering where all the liquidity disappeared to. Elsewhere, those other players went in the market with funds have been left wondering where they can best invest their capital. Many would like the reassurance of having more transparent and visible products to which they can allocate their resources. Gros-Pietro suggests that M&A or private equity could be two possible solutions for that.

GIAn MARIA GROS-PIETRO, CHAIRMAn, ATLAnTIA SPA

GIAn MARIA GROS-PIETRO, CHAIRMAn, ATLAnTIA SPA


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KeYnOTe ADDReSS: ITALIAn ecOnOMIc OUTLOOK

RAInER MASERA, ExPERT MEMBER OF THE BOARd AT EIB, dIRECTOR AT nOMURA, dEAn OF THE ECOnOMICS FACULTy And PROFESSOR OF POLITICAL ECOnOMy AT UnIvERSITy GUGLIELMO MARCOnI, ROME

Rainer Masera, Board Member of the European Investment Bank and Professor of Political Economy at Marconi University of Rome, echoed Gian Maria Gros-Pietro’s view on the role of the Financial sector in his keynote address. He warned that one consequence of the Financial sector’s failure to adequately address its shortcomings could be a protracted recovery or even a more prolonged downturn. Masera noted that Asia has been more resilient to the crisis than other regions, with China and India showing particular durability. In Europe, a recovery is only expected to begin in 2010. Italy is no exception to this, with GdP growth forecast to be flat, although some other figures presented by the head of the Bank of Italy, Mario draghi, forecast a modest increase of around 0.2-0.3%.

Looking at sectors, Masera said that Infrastructure, in particular, is one area that the European Investment Bank has been financing strongly. He believes that an investment push in Infrastructure is a factor that could lead to a recovery. Indeed, the UK is the only country in Europe where the government has not given much support to Infrastructure, since it has devoted most of its resources to the Financial sector, including banks.

Masera then presented some figures prepared by the IMF about fiscal balances. Italy, Masera said, is one of the most advanced economies if we look at this parameter with a deficit of under 6% of GdP projected for 2010, compared to budget shortfalls of around 12% for the UK and the US. nonetheless, Italy has

less credibility in the world with respect to public debt, even though its fiscal outlook is not as bad as that seen in other countries. Italy has the opportunity to make positive changes, but due to its low credibility and high debt, the country will have to work hard to get out of the crisis. Italy is also suffering from the fact that its banks are not as strong as those in other countries.

Masera concluded his speech by saying that it is important to adopt the diamond approach, where a prudent vision of the microeconomy needs to be combined with the macroeconomy. In addition, he highlighted the need for local authorities to work closely with the European authorities.


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“IT IS IMPORTAnT TO AdOPT THE dIAMOnd APPROACH. A PRUdEnT vISIOn OF THE MICROECOnOMy nEEdS TO BE COMBInEd wITH THE MACROECOnOMy.”

RAInER MASERA, dIRECTOR AT nOMURA

ITALY M&A FORUMOTTOBRE 2009

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“AFTER A PERIOd wHERE MAny IndIvIdUALS wERE RELUCTAnT TO TALK PUBLICLy, PEOPLE ARE nOw STARTInG TO GIvE THEIR vIEwS On HOw THE MARKET wILL PAn OUT GOInG FORwARd.”

MARA CAvERnI, PARTnER, PRICEwATERHOUSECOOPERS


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The first panel of the day analysed the state of the Italian M&A market. Moderator Giovanni Amodeo introduced the panel by presenting some M&A data produced by mergermarket. In Q3 2009, there were 2,419 transactions in Europe worth a combined €190.1bn, a dramatic fall from the 4,424 valued at €541.8bn for the same period in the year before. The situation in Italy is similar. In Q3 2009, there were 174 M&A transactions collectively valued at €16.3bn, down from 331 deals worth €24.1bn in 2008.

All the panellists agreed that in the next twelve to eighteen months there will not be many large-cap deals, but rather mid-market and opportunistic transactions. Massimo Pappone said that the M&A market has seen a significant drop, especially if we look at mid-size transactions, despite increased confidence from executives. Claudio Sposito pointed out that good transactions will still be undertaken in the future, in particular those where the owner is forced to take action.

Marco Belletti said that we should expect continued non-core disposals by large players who need liquidity, particularly in the Financial Services sector where insurance companies will offload assets. He said that

now is a good time to undertake deals with company valuations down on 2006 and 2007 levels and added that companies can use new instruments to finance acquisitions, such as unrated bonds or private placements.

Giancarlo Aliberti gave a more optimistic view. He said that we are going to continue to see transactions structured more creatively, for example, with private equity firms and strategic investors teaming up to broker acquisitions. He mentioned the proposed acquisition of Travel Channel by Providence as a recent example of a transaction of this kind. Furthermore, Aliberti believes that banks will only start lending money again from 2011, and as a consequence, we are going to see many deals where private equity firms put up a significant amount of equity. Apax closed a deal in July 2009 in the US where it acquired Bankrate for over US$488m, with the vast majority of the aquisition/the purchase financed with private equity.

All panellists agreed that non-core disposals as well as deals in the Automotive and Financial Services sectors will take place. Paolo vacchino added that we can see activity in the Cleantech and Renewables niches as well as Infrastructure and Services for the

elderly. Both Pappone and Belletti point to the Consumer Retail sector as one where there will be consolidation in the short term.

The panel also discussed how clients’ needs have changed in the current market. Belletti believes that there is now more complexity and that clients have become more careful with thorough due diligence carried out. Pappone said that deal negotiations last much longer than in the past while vacchino commented that now the psychological profile of the entrepreneur is also taken into consideration when analysing a company.

On the structure of the deals the panellists had differing viewpoints. Pappone acknowledged that there are some more complex deal structures than in the past. However, he said that it remains to be seen whether some of these transactions will complete. He also added that in terms of valuations, there is still a disconnect between buy- and sell-side parties on deals. Lastly, vacchino noted that we are likely to see more deals with earn-out agreements, vendor financing and shareholder pacts, while Aliberti expects more restructuring deals and transactions with more equity injected.

M&A HeALTH cHecK

GIAnCARLO ALIBERTI, MAnAGInG dIRECTOR, ITALy, APAx PARTnERSMARCO BELLETTI, HEAd OF M&A ITALy, SOCIéTé GénéRALE CORPORATE & InvESTMEnT BAnKInGMASSIMO PAPPOnE, CO-HEAd M&A, LAzARdCLAUdIO SPOSITO, CEO And CHAIRMAn, CLESSIdRA CAPITAL PARTnERSPAOLO vACCHInO, CEO, ABACUS FUndGIOvAnnI AMOdEO, EdITOR EMEA, MERGERMARKET (MOdERATOR)


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MARA CAvERnI, PARTnER, PRIvATE EQUITy LEAdER, PRICEwATERHOUSECOOPERS

Mara Caverni started her presentation by speaking about the current state of the private equity market in Italy. She noted that, after a period where many individuals were reluctant to talk publicly, people are now starting to give their views on how the market will pan out going forward. Caverni pointed out that the first half of 2009 saw 65% fewer buy-outs when compared to the same period for the previous year. Financial sponsors are now concentrating on their portfolios, and in particular on restructuring non-performing companies. The challenges they are facing include the lack of credit in the market, a

scarcity of performing companies and the mismatch in terms of price expectations between buyers and sellers.

Meanwhile, corporates are in a much stronger position, although it remains too early to speak of a consolidated recovery. One advantage strategic investors have is that they can use different forms of financing, including corporate bonds. Looking at the Italian market, corporates have issued €17bn worth of bonds in the first nine months of the year with a further €10bn expected to come to the market in the near term. In addition, corporate

acquirers can pay for transactions by using paper or a mix of paper and cash. Moreover, they are no longer facing the same level of competition from private equity firms.

Caverni noted that after the 2000-2001 downturn (which is not wholly comparable to the latest in terms of pricing), the recovery started from the corporate world. She concluded her speech by saying that there are some signals that a recovery could happen soon, borne out by the fact that funds are sitting on a significant amount of dry powder.

PRIvATe eqUITY

HOW TO geT A DeAL DOne TODAY

BRUnO BARTOCCI, PARTnER, LEGAnCE STUdIO LEGALE ASSOCIATOGUIdO FUnES nOvA, dIRECTOR, THE CARLyLE GROUPMARCO TAnzI MARLOTTI, PARTnER, M&A LEAdER, PRICEwATERHOUSECOOPERS GIUSEPPE PAnIzzARdI, HEAd OF M&A, FInMECCAnICAROBERTO SIAGRI, CHAIRMAn, EUROTECHPATRIzIO SURACE, CEO, PMS STEFAnIA PEvERARO, CAPOSERvIzIO, MILAnO FInAnzA (MOdERATOR)

The final panel of the morning analysed new challenges market players need to be aware of and the ways in which M&A have changed. Guido Funes nova noted that in recent years market operators have taken a more superficial approach to M&A deals, but this has now changed. Advisers and companies are conducting more extensive due diligence and now really looking at factors such as a target company’s capacity to generate cash flow in the future.

Funes nova said that despite ever greater scrutiny in the due diligence process, there are still several issues to resolve: for instance, private equity firms have capital available to deploy, but banks are still not lending much money. He noted that convertible bonds, vendor financing and earn-out agreements are instruments that M&A practitioners will use more and more to overcome this obstacle going forward.

In keeping with the subject of due diligence, Bruno Bartocci went on to say that the banks are now substantially more involved. In addition, he said that litigation is also becoming ever more important. Marco Tanzi Marlotti noted that strategic investors are interested in having access to due diligence that concentrates on operational aspects and for this reason, business plans need to be prepared in a more accurate way.

Giuseppe Panizzardi commented that from a corporate point of view, it is a question of the benefits and the drawbacks of organic- versus M&A-fuelled growth. He said that when looking at buys, Finmeccanica looks more at the long-term strategy and return on investment of the target company. Roberto Siagri noted that in the past people were happy to overpay when doing deals, while now they are unhappy to pay even a little, a

change which is reflected in the increase in the value of non-cash transactions.

Patrizio Surace said that companies now need to be more straightforward in communicating the hard facts, rather than trying to hide underlying problems. Reputation is the key factor at the moment, which is more difficult to manage than in past years. The abundance of information available on the Internet cannot easily be concealed and can affect a company’s image.

All the panellists agreed that there is gap between the buy- and sell-side over the valuation of assets and that earn-outs cannot always be the solution to the problem. Both Funes nova and Bartocci noted that there will be more distressed situations in the future while Tanzi Marlotti commented that multiples will shift down further to around 3-4xEBITdA.


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OPenIng ADDReSS: AFTeRnOOn SeSSIOn

AnTOnIO ALvAREz III, MAnAGInG dIRECTOR And HEAd OF EUROPEAn PRACTICE, ALvAREz & MARSAL

Antonio Alvarez III began the afternoon session by making a comparison between the situation in the US and in Europe. The US has seen significant restructuring activity in the Chemicals, Automotive and Telecommunication sectors while Alvarez & Marsal, as a firm, has seen a 300% increase in certain segments and 40% across all its businesses, driven by a spike in restructuring activities. Alvarez said he expects a delay in Europe in terms of when the companies will face restructuring, emblematic of the fact that Europe usually lags behind the US.

Alvarez believes that the government support for banks has made many of these institutions lose the urgency to resolve the underlying

issues that borrower companies were facing. In Europe, loans have been extended while maturities and covenants have been pushed out with companies losing competitiveness. The Italian market has a lot of SMEs backed by commercial banks and direct loans. In many instances, there are long standing relationships between the company owners and their financiers, who quite often do not want to push a local company into distress.

Alvarez went on to outline his firm’s approach to working with client companies in a distressed situation where they first aim to attempt to convince companies to properly restructure. He offered the example of vita, a company owned by Texas Pacific Group (TPG), which was over

leveraged, underperforming and sensitive to the commodity markets. Alvarez helped TPG put together a revised business plan around a substantially reduced level of debt carry. The business was recapitalised and costs were reduced so that the company was again in a position to attack competitors. Alvarez believes that this approach to restructuring is not occurring in wider Europe. There are unfortunately just a few examples of properly restoring business health and solidity.

He added that the firm looks to make decisions quickly and can, if unavoidable, step into the management team. Ultimately, the stability of the company is key, along with dealing with the various creditors.

Giovanni Amodeo’s presentation concentrated on recent M&A trends in the Italian market and analysed in-depth historical data that was presented in the morning session. The data shows that there has been a decrease in terms of the value and volume of transactions in both Europe and in Italy. In Europe, there were 2,419 transactions in the third quarter of 2009 worth a collective €190.1bn, down significantly from the 4,424 transactions valued at €541.8bn during the same period in the previous year. In Italy the situation is similar with 174 transactions worth a combined

€16.3bn announced in Q3, representing a big fall from 331 deals worth €24.1bn over the same time period in 2008.

Amodeo then took a look at the overall deal market in Europe by sector. Industrials & Chemicals and Consumer are the lead sectors in Europe with 19.5% and 16.4% of the total M&A volume. Looking at valuations, Energy, Mining & Utilities and Financial Services lead the way with a 38.5% and a 20.5% respective share. In Italy, the Industrials & Chemicals niche also leads with nearly one quarter of

M&A activity, followed by Financial Services with 14.5%. By deal value, Energy, Mining & Utilities and Financial Services top the list with a 54% and a 28% respective share.

The presentation was closed with an indicator of the future of M&A in the EMEA region, based on a mergermarket’s heat chart. The most active areas, according to our data, will be Consumer in (the) CEE, TMT in the UK and Financial Services in the Middle East.

OveRvIeW: THe LIe OF THe LAnD

GIOvAnnI AMOdEO, EdITOR EMEA, MERGERMARKET

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*connectedthinking


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cORPORATe ReSTRUcTURIng AnD TURnAROUnD MAnAgeMenT

AdRIAnO BIAnCHI, MAnAGInG dIRECTOR, ALvAREz & MARSALFEdERICO CAnCIAnI, vICE PRESIdEnT, OAKTREE CAPITAL MAnAGEMEnTGIAndOMEnICO CIARAMELLA, PARTnER, LEGAnCE STUdIO LEGALE ASSOCIATOLUCA LUPOnE, PARTnER, HEAd OF RESTRUCTURInG, PRICEwATERHOUSECOOPERSMICHELE PEdERCInI, FInAnCIAL SPOnSORS COvERAGE MAnAGER, InTESA SAnPAOLOSEREnA RUFFOnI, SEnIOR REPORTER, dEBTwIRE (MOdERATOR)

In the restructuring and turnaround management session, Adriano Bianchi noted that some of the crisis we are currently witnessing stemmed from over leverage (few deals closed in the golden days had a debt service cover ratio of less than one, meaning that those companies were bound to default, or even absent, an economic crisis situation).

yet Bianchi said that even in less leveraged instances, the business operators and creditors have looked more at the financial than at the industrial aspects of the business.It would thus be advisable for the involved players to start by first looking at a company’s business plan and then go into the financials.

Furthermore, restructuring usually requires cash investment, with costs to be gauged. In the current environment where banks (and generally shareholders) are usually ready to restructure debt but less inclined to put new money into a business to be restructured, this becomes a major problem. He also stressed that the skill-sets of the people who work on restructuring are crucial and that prior experience is vital.

Michele Pedercini added that financial restructuring is only possible with the approval of lenders and stakeholders and that the underlying business has to have prospects for future growth. Pedercini went on to say that Italian law does not support the ’revocatorie’.

Luca Lupone pointed out that under the current circumstances selectivity is the feature which matters the most, both for financial institutions and for professional service providers - selectivity meaning the ability to identify and pursue viable solutions only among possible ones, while leaving behind situations where economic fundamentals of the business cannot be revamped.

Giandomenico Ciaramella commented that companies often encounter a psychological barrier to admitting that they are in trouble. He went on to say that from 2005 onward have bankruptcy laws in Italy become effective.

Earlier on there was a temporary solution with the amministrazione controllata and for small companies, the concordato preventivo. The discussion moved along to the downsides

and upsides of Articles 67 and 182-bis on companies in Italy. According to Article 67 of the bankruptcy code, all the payments and warrantees received in a restructuring plan analysed by an appraisal are exempt from claw back actions. The 182-bis states that banks need to get an agreement with 60% of the creditors and obtain the appraisal of the court. Lupone commented that despite the current attitude of lenders to postpone repayment deadlines in order to help troubled businesses, a lack in their openness to grant them fresh financial resources could prevent viable rescue plans to be successful.

Ciaramella closed by saying that the elimination of the regulatory limit of the 15% stake that a financial institution could own in a company could help the current situation.


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The final panel discussion of the forum addressed how the crisis will be overcome and which measures need to be implemented to this end. Giampo Bracchi noted that private equity funds still have money – some €7bn alone in Italy – but have altered their investment strategies. Given current liquidity constraints, there are more minority stake deals and transactions involving companies at the lower end of the market. The market has also seen an increase in the number of deals struck in partnership with regional financial investors, while Bracchi expects more early stage deals going forward. Bracchi went on to say that Italian private equity funds hold some 1,200 investee companies in their portfolios, some of which are suffering as investors have had difficulties refinancing in some instances.

Giuseppe Miroglio brought the point of view of a corporate investor from the textile sector, which has been heavily hit by the economic

downturn. The company operates throughout all the stages of the production chain and Miroglio remarked that the manufacturing stage has been particularly hard hit. Miroglio believes that the secret to overcoming the crisis is to take corrective action early and to implement a change in the corporate culture – for instance, trade unions need to have a co-operative approach.

Eugenio Morpurgo went on to analyse factors which have negatively impacted the M&A market in Italy and paid particular attention to the lack of confidence that has engulfed the economy. Morpurgo noted that companies which manufacture products that rely on the ‘made in Italy’ trademark have been particularly hit hard. He added that in his capacity as an M&A practitioner, he has seen firms that had EBITdA of €80m last year fall to zero and as a result this has lead to an enormous gap in valuations. Looking ahead

it is extremely difficult to make predictions and firms are finding this when developing a business plan for the year ahead. Morpurgo believes that we need 9-12 months before the market stabilises and added that there will be more delayed payments and earn-outs. The clause ‘subject to financing’, which in the past was just an accessory, will have more and more importance in deals.

Morpurgo foresees M&A being strongest in the Energy and Pharmaceutical niches in the future, while the recovery for private equity firms will be more delayed. The recovery in deal making will likely occur in the second half of 2010 and into 2011 with strategic investors being involved in the the lion’s share of transactions. Morpurgo believes that quasi distressed situations will continue to offer good value for acquirers.

BeATIng THe cRISIS: THe AgenDA FOR THe FUTURe

GIAMPO BRACCHI, CHAIRMAn, ITALIAn PRIvATE EQUITy And vEnTURE CAPITAL ASSOCIATIOnGIUSEPPE MIROGLIO, CEO, MIROGLIOEUGEnIO MORPURGO, CEO, FInEUROP SOdITICSTEFAnIA PEvERARO, CAPOSERvIzIO, MILAnO FInAnzA (MOdERATOR)

Looking ahead, Belletti believes that non-core disposals by larger corporates will be the principal driver of activity with the Pharma and Automotive sectors witnessing significant deal flow. Belletti expects the private equity market to be an interesting space and predicts that the IPO and secondary buyout markets will

slowly return over the course of 2010. Recent developments in the equity and corporate bond markets also offer encouragement. He concluded his remarks by saying that market players will continue to find new ways to finance deals, becoming increasingly creative in a bid to bridge the current liquidity gap.

cLOSIng ReMARKS

MARCO BELLETTI, HEAd OF M&A ITALy, SOCIETE GEnERALE CORPORATE & InvESTMEnT BAnKInG


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HISTORIcAL DATA

Announced date

Status Target company Target sector Target country

Bidder company Bidder country

Seller company Seller country

deal value (€m)

Feb-09 C Italgas SpA Energy, Mining & Utilities

Italy Snam Rete Gas SpA Italy EnI SpA Italy 4,206

Feb-09 C Stogit SpA Energy, Mining & Utilities

Italy Snam Rete Gas SpA Italy EnI SpA Italy 2,588

Feb-09 C Alleanza As-sicurazioni SpA (49.6% stake)

Financial Services

Italy Assicurazioni Generali SpA

Italy 1,805

May-09 C Enel Rete Gas SpA (80% stake)

Energy, Mining & Utilities

Italy AxA Private Equity; F2i SGR SpA

Italy Enel distribuzione SpA Italy 1,716

Jul-09 C Intesa vita SpA (50% stake)

Financial Services

Italy Intesa Sanpaolo SpA

Italy Alleanza Assicurazioni SpA Italy 706

Aug-09 P Findomestic Banca SpA (25% stake)

Financial Services

Italy BnP Paribas Personal Finance

France Cassa di Risparmio di Firenze SpA; Cassa di Ris-parmio di Pistoia e Pescia

Italy 500

Apr-09 C Antonveneta ABn AMRO; Prima Sgr

Financial Services

Italy Clessidra Capital Partners II

Italy Banca Monte dei Paschi di Siena SpA

Italy 400

Jun-09 P IPI SpA Real Estate Italy MiMoSe Italy Banca Intermobiliare di Investimenti e Gestioni SpA

Italy 363

Jan-09 C Alitalia SpA (25% stake)

Transportation Italy Air France-KLM SA France 323

Sep-09 P Permasteelisa SpA Construction Italy Investindustrial SpA Italy 219

Announced date

Status Target company Target sector Target country

Bidder company Bidder country

Seller company Seller country

deal value (€m)

May-09 C Enel Rete Gas SpA (80% stake)

Energy, Mining & Utilities

Italy AxA Private Equity; F2i SGR SpA

Italy Enel distribuzione SpA IBI 1,716

Apr-09 C Antonveneta ABn AMRO; Prima Sgr

Financial Services

Italy Clessidra Capital Partners II

Italy Banca Monte dei Paschi di Siena SpA

IBO 400

May-09 P Saeco Internation-al Group SpA

Consumer Italy Koninklijke Philips Electronics nv

nether-lands

PAI Partners Exit 200

Mar-09 C CastelMac SpA; Frimont SpA; Scotsman Group

Industrials & Chemicals

Italy Braveheart Acquisi-tion Inc

USA Manitowoc Company Inc IBO 120

Jan-09 C Alkimis SGR SPA (15% stake)

Financial Services

Italy IdeA Alternative Investments SpA

Luxem-bourg

IBI 100

Jan-09 C Ecolevante SpA; waste Recycling SpA

Industrials & Chemicals

Italy Corvette Srl Italy IBO 82

Feb-09 P Banca Profilo SpA (42% stake)

Financial Services

Italy Sator SpA Italy IBI 70

Sep-09 C GTS Group SpA (72% stake)

Consumer Italy Alfa-Parf Srl Italy Alcedo SGR SpA.; S+R Investimenti e Gestioni SGR SpA

Exit 50

Feb-09 C Publimethod Spa TMT Italy Rp3 Fund Italy Mittel Private Equity; Progressio Investimenti I

SBO 46

Jul-09 P Mirato SpA (45.15% stake)

Consumer Italy Benefit SPA Italy MBO 41

TOP 10 ITALIAn M&A TRAnSAcTIOnS, q1-q3 2009

TOP 10 ITALIAn PRIvATe eqUITY TRAnSAcTIOnS, q1-q3 2009

C= Completed P= Pending

C= Completed P= Pending


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number of deals value (€m)

Q1 2004 55 3862

Q2 2004 110 12992

Q3 2004 93 4611

Q4 2004 104 28051

Q1 2005 90 10158

Q2 2005 90 28679

Q3 2005 95 19637

Q4 2005 100 5879

Q1 2006 81 18214

Q2 2006 110 9116

Q3 2006 95 40184

Q4 2006 122 33642

Q1 2007 99 15297

Q2 2007 112 39660

Q3 2007 104 15162

Q4 2007 95 16646

Q1 2008 98 5616

Q2 2008 129 12285

Q3 2008 104 6204

Q4 2008 106 7987

Q1 2009 57 10101

Q2 2009 58 3411

Q3 2009 58 2713


Q1 2004 8 117

Q2 2004 17 1567

Q3 2004 27 2303

Q4 2004 13 1153

Q1 2005 23 2484

Q2 2005 21 2187

Q3 2005 19 1149

Q4 2005 18 1570

Q1 2006 14 459

Q2 2006 25 2449

Q3 2006 26 4576

Q4 2006 25 4401

Q1 2007 20 378

Q2 2007 24 3794

Q3 2007 17 1424

Q4 2007 21 1951

Q1 2008 25 2242

Q2 2008 32 3695

Q3 2008 29 1379

Q4 2008 24 1261

Q1 2009 12 438

Q2 2009 9 2151

Q3 2009 12 129

ITALIAn M&A TRenDS ITALIAn PRIvATe eqUITY BUYOUTS


Q1 2004 6 215

Q2 2004 5 964

Q3 2004 8 458

Q4 2004 7 257

Q1 2005 4 177

Q2 2005 6 159

Q3 2005 15 1032

Q4 2005 11 1221

Q1 2006 6 2531

Q2 2006 6 655

Q3 2006 7 3680

Q4 2006 8 3530

Q1 2007 8 577

Q2 2007 7 160

Q3 2007 7 1230

Q4 2007 11 2102

Q1 2008 8 1705

Q2 2008 10 497

Q3 2008 13 977

Q4 2008 9 241

Q1 2009 4 58

Q2 2009 3 200

Q3 2009 4 74

ITALIAn PRIvATe eqUITY exITS

INVESTMENT BANKING – GLOBAL FINANCE – GLOBAL MARKETSSociété Générale is authorised by the Comité des Etablissements de Crédit et des Entreprises d’Investissement in France, regulated by the Financial Services Authority for the conduct of its UK business. In the United States, certain securities, underwriting, trading, brokerage and advisory activities are conducted by Société Générale Group’s wholly-owned subsidiary SG Americas Securities, LLC, a registered broker-dealer and member of FINRA and SIPC. © 2009 Société Générale Group and its affiliates.

We stand by you

“Recent jumbo deals have brought M&A back into the spotlight. M&A now looks ready for a comeback, we expect

industries to take advantage of the turmoil witnessed during the last year to increase scale at good value, on the

other hand we believe distressed companies will be looking to make divestments to recover some value for their

shareholders.The need to generate value will lead to a series of major strategic deals, the sort of corporate moves

people have been talking about and expecting for a number of years. Société Générale Corporate & Investment

Banking stands by you to make it happen.” Marco Belletti, Head of M&A Italy. www.sgcib.com

IN MILAN, AS ACROSS THE WORLD,

WE STAND BY YOU WITH OUR M&A EXPERTS.

Romania

Enel SpA

Potential investment in Cernavoda Unit 3 and 4 Nuclear Power Plant

Sole Financial Adviser to ENEL

France

Gaz de France

Merger with Suez

Financial Adviser to Gaz de France

France/Belgium

SFPI (Kingdom of Belgium)

Disposal of Fortis Bank and Fortis Insurance Belgium to BNP Paribas

Financial Adviser to SFPI

Italy

Sale of N&W Global Vending S.p.A. to Barclays Private Equity Ltd and Investcorp SAFinancial Adviser to Argan Capital / Merrill Lynch Global Private Equity

France/Sweden

Pernod Ricard

Acquisition of Vin & Sprit (V&S) AB

Financial Adviser to Pernod Ricard

SGCIP51_TOMBSTONES_MILAN_A4_UK.indd 1 24/09/09 15:03:11


21

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

0

20

40

60

80

100

120

140

valu

e (

m)

num

ber o

f dea

ls

number of deals value ( m)

116 115 124 129 143

70

65 74 76 90 82

38

119 120 134

122 142

46

38 35 30 33

40

10

13 14 13 11

16

4

11 17 31 25

14

5

0

50

100

150

200

250

300

350

400

450

500

2004 2005 2006 2007 2008 Q1-Q3 2009

num

ber o

f dea

ls

>US$500m

US$251m-US$500m

US$101m-US$250m

US$15m-US$100m

<US$15m

Not disclosed

ITALIAn M&A TREndS

ITALIAn dEAL SIzE SPLITS: vOLUME

HISTORIcAL DATA


22

25%

14%

13%

10%

9%

8%

6%

6%

5% 2% 2%

Industrials Financial Services Consumer Business Services Energy, Mining & Utilities TMT Construction Leisure Pharma, Medical & Biotech Real Estate Transportation

25%

23%

19%

13%

4%

4%

4%

4% 4%

France Germanic North America Benelux UK & Ireland Iberia Nordic CEE South America

54%

28%

4%

3% 3%

2% 2% 2%

1% 1% <1%

Energy, Mining & Utilities Financial Services Industrials Real Estate Construction Transportation Consumer Leisure TMT Business Services Pharma, Medical & Biotech

52%

15%

13%

13%

4% 2% 1%

France Benelux North America Germanic UK & Ireland Iberia CEE

SECTOR SPLIT By vOLUME OF ITALIAn M&A, Q1-Q3 2009

SECTOR SPLIT By vALUE OF ITALIAn M&A, Q1-Q3 2009

CROSS-BORdER InBOUnd M&A vOLUME By BIddER REGIOn, Q1-Q3 2009

CROSS-BORdER InBOUnd M&A vALUE By BIddER REGIOn, Q1-Q3 2009

HISTORIcAL DATA


23

ABOUT ALvAReZ & MARSAL

In the current economic cycle Italy’s Industrial sector finds itself facing new and old challenges: the weakness of the capital structure (and not just in respect of LBOs closed in the golden days of easy credit); the difficulty in dealing with a global world whereby economies enjoy much greater flexibility; and, lastly, the difficulty of the typical Italian economic fabric (made of SME) in confronting the crisis with specialised managerial resources. The latter is particularly true in what is often a family-type management system where, in addition to starting up the firm, the entrepreneur is also a manager having lead the firm through its growth phases.

Furthermore until recently and probably still today, the preferred, if not exclusive, path of restructuring plans has been to focus on financial restructuring (mainly debt) with the operating component often neglected.

In the past few months A&M, world leader in turnaround and performance improvement for over 20 years (hence with an operating and industrial bias), has noticed that the majority of the stakeholders in stressed and distressed situations have been paying greater attention to the operational and industrial side of any restructuring plan.

As part of this the question about the skill set required to drive a restructuring plan to success if more and more often emerging. naturally it is difficult for someone who has built up and grown his/her company to consider a thorough restructuring insofar as it implies recognizing that some of the past

decisions have not been the most appropriate. Consequently one of the main issues to tackle when defining a restructuring plan should be how to implement the turnaround and, most of all, which professional skills are needed by management to run the business in a time of crisis.

The Anglo-Saxons have found an answer to this need in the figure of the Chief Restructuring Officer (CRO), a role that is still relatively little known in the Italian market. In a time of crisis and consequent restructuring the CRO is not only a valuable resource for the shareholder but, if well played, also (and most of all) for management:

1) The CRO (and his/her team – actually the leader never works alone) is most effective when cooperating with the CEO who, while capitalising on his/her long-term knowledge of the industry, continues to focus on the top line (customer relationships, product and market development). The CRO is instead focused on “resetting the machine”, lowering the breakeven point, redefining the organisational structure, readjusting/reducing costs, keeping risks under control, and renegotiating agreements with all the stakeholders. The CRO’s one and only objective is to again put the business in a position to compete, and as soon as possible, to (again) hand it over to its standing management.

2) Unlike the CEO, the CRO has no ‘legacy’, no ties with the past. His/her independence of previous choices enables him/her to approach problems without delay, eliminate

non-strategic assets, close production lines that are not sufficiently profitable, and examine with a fresh mind organisational structures that are no longer in line with needs.

3) The CRO is used to act swiftly, under stressful conditions and mainly with an eye on cash, which sets him/her markedly apart from the CEO.

4) The CRO is a time manager, rather than a consultant, who acts personally with the goal of completing the restructuring plan in as short a time as possible.

Thus, the CRO should be able to respond “spot on” to the requirements of the current market phase and the different stakeholders involved. This applies not only to companies controlled by financial sponsors but also (and perhaps, most of all) to entrepreneurs/managers who, once the turnaround comes to an end, could again take charge of their business, the restructuring of which has been attended to by a temporary team specialised in ensuring that a break with the past and a change of gears are implemented.

For more information:Alvarez & Marsal Italia SrlPiazzale Luigi cadorna, 420123 MilanoTel: + 39 (0)2 8596411

To know more about Alvarez & Marsal worldwide locations, please visit www.alvarezandmarsal.com

The chief Restructuring Officer (cRO) – a little known but central function in dealing with the current market phase.

15FRENCH M&A FORUMJUNE 2009

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25

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26

For information regarding this report please contact:

Karina cooperPublisher

T: +44 20 7059 6324 e: [email protected]

895 Broadway #4new york, ny 10003USA

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