The banker: “Italy holds up to inflation and businesses are healthy”

Milan After having been Sergio Marchionne’s banker for years, Richard Mulonecountry head of UBS for Italy, in 2022 he followed many operations for Italian companies, including Dufry-Autogrill or Zegna—Tom Ford, and continues to see pink for Italian companies.

Between the pandemic, war, inflation, rate hikes, M&A activity has plummeted, how do you see 2023?
“Globally there has been a 35-40% contraction in M&A volumes, it is also true that in Europe the decline, despite the war, has been more contained. Out of approximately 3.7 trillion dollars worldwide, 1, 3 trillion are European: 20% less than in 2021, but 23% more than the pre-pandemic average, i.e. in the period 2017-2020.So it is true that there has been a decrease, but not a striking one, and the strong liquidity that still persists on the market makes me positive also for the future”.

However, certain operations have stopped, including quotations or debt refinancing…
“True, but in this type of transaction a lot depends on the windows that are created on the market, which are becoming increasingly volatile and unpredictable. Those who could postpone a bond issue did so, but those with stringent needs looked for other sources of financing. The same goes for IPOs, those who didn’t need to be listed will wait for better times. But let me tell you that we assist several companies that have studied a placement and none of these has canceled the project, which is just frozen”.

So in 2023, do you expect many of the operations frozen this year to come back into the news?
“It will depend on the performance of the markets, which is increasingly volatile, and therefore difficult to predict, but I hope so. Having said that, even in 2022 Italy proved to be more resilient than many other countries, including European ones, and the industrial fabric tricolor is made up of entrepreneurial excellence, which has been able to manage inflationary phenomena. Finally, the strength of the dollar helps us because we have always been an exporting country, with an important commercial exchange with the United States. Italian companies are generally healthy, and despite the war and inflation, they will end the year well. This makes me optimistic for our country, which has proved to be increasingly attractive, also in the eyes of foreign investors”.

Don’t you see a scale problem that makes them uncompetitive?
“Scale helps and we must encourage it, but not at all costs. We need to focus on combinations that create strategic and industrial value, helping our companies to position themselves on products and services with high added value. I tell all my clients that in moments like this, opportunities are created. The world is less and less delocalized, the pandemic has forced us to go back to producing local for local, a situation which, together with the adaptation of sustainability standards, has prompted the wisest companies to do new productive investments or attracting new local skills. Now healthy companies must evaluate the opportunities. Those led by forward-looking captains will focus on long-term industrial logic”.

In this context of interest rates and inflation, however, private equity, which has helped the generational transitions of family businesses so much, is on its knees…
“I do not agree, indeed I believe that there will be a healthy screening of operations towards more industrial and less financial ones. From 2012 to today, the average growth of private equity operations in Europe has been 12% per year with an also an increase in the average size of invested capital. Atlantia-Blackstone-Edizione was the biggest deal of the year in Italy. In the case of excellent companies such as Fedrigoni, the funds decided to only partially valorise and partially reinvest. that funds in Europe still have a lot of liquidity, which has gone from 1.1 to 3.6 trillion dollars from 2012 to today. Looking at the implicit multiples of the acquisitions, it can be seen that they have been corrected somewhat, going from 12.7 in 2021 to 11.4 in 2022 (as enterprise value divided by EBITDA, ed). A healthy repositioning, but not a collapse.”

Credit Suisse, your prime rival in Switzerland, is facing a credibility crisis and a complicated turnaround. How do you see it?
” Parochial attitudes are not part of my and our culture. When a competitor goes through complex moments it is certainly never good news for anyone”.

The banker: “Italy holds up to inflation and businesses are healthy”