Italy has historically made up a smaller share of Europe’s PE market, but regulatory changes at home and abroad and changing attitudes toward PE are making investors look twice.
Last year, Italy became the fourth-largest PE market in Europe in terms of total investment. The country saw a record €61 billion (about $67.99 billion) transacted across 560 deals, overtaking the Netherlands and more than doubling 2023’s total.
It was also the fastest-growing among the top five markets.
Italy’s PE investment has slowed this year amid a broader regional slowdown, with €11.2 billion invested across 168 transactions as of May 14.
Milan, meanwhile, has burnished its reputation as a PE hub in the country, with several notable firms establishing or expanding their presence in the city.
The latest was Ares Management, which opened its doors in Milan this month to bolster its Italian presence, particularly for its direct lending and wealth management strategy.
Similarly, London-based Columna Capital, a lower-middle-market PE firm, inaugurated a Milan office in November.
More PE talent could also be making its way into Italy. CVC Capital Partners co-founder Rolly van Rappard is considering joining other wealthy leaders looking to leave the UK for cities like Milan in search of more favorable tax treatment, Private Equity News reported on May 13.
Changing attitudes
“The market has always had the right ingredients: strong SMEs, industrial know-how, and export orientation,” said Francesco Lodrini, a partner at Milan-based firm Ambienta.
Now it also has a deeper ecosystem, more professional investors and increasing cultural alignment.
Attitudes towards PE are changing, too. Lodrini notes that Italian entrepreneurs who once viewed PE with suspicion are more comfortable taking private capital. Today, PE investors are associated with providing long-term growth and even solutions for succession.
Londrini points to a merger of two century-old water pump companies, Caprari and Calpeda, which Ambienta backed in 2022.
“These families knew each other for decades but wouldn’t merge on their own,” he said. “We provided the catalyst.”
The regulatory environment for such deals is also more favorable. Today, Italy’s legal and tax framework for structuring manager incentives is among the clearest in Europe—offering much-needed predictability for international investors.
Specifically, in 2024, Italy’s Investment Management Exemption came into effect, allowing foreign investment funds to work with managers in Italy without triggering local taxes when certain conditions are met.
Italy still has far to go, however.
Alto Partners co-founder Raffaele de Courten, who previously worked at Mediobanca and the European Investment Bank, notes the country is still behind its larger peers in deal value, fundraising and deal count.
For example, France and Germany recorded €80 billion and €78 billion in total 2024 deal value across 1,114 and 860 deals, respectively.
“We might have more activity, but we’re still dealing with low volumes,” said de Courten. “Italian GPs are small, and pan-European funds dip in and out based on perceived political or macroeconomic risk.”
While attitudes to PE are changing in Italy, it still lags behind more mature European PE markets like France—not just in the numbers, but also in terms of corporate culture.
Structural hurdles
“In France, when a company reaches a certain size, it’s almost natural to look to PE,” said Lodrini. “In Italy, companies of the same size often meet us for the first time.”
Both Lodrini and de Courten agree that Italy suffers from structural weaknesses. De Courten highlights geopolitical risk perception, bureaucratic inefficiencies and a lack of state support.
“PE isn’t a political priority in Italy,” he said. “France and Spain have done much more to build their local PE ecosystems through sovereign funds and strategic support.”
And foreign LPs remain remain cautious about investing in the country. De Courten noted that Italy is often last on some investors’ list not because of performance, but because Italy isn’t considered a long-term reliable jurisdiction.
“The brand just isn’t there,” de Courten said.
Yet, for those embedded in the market, the fundamentals remain compelling. For investors like Lodrini, it is not a question of whether PE will grow in Italy, but how fast.
“It won’t be politics that drives success here,” he said. “It’ll be great entrepreneurs building great companies—and funds helping them go faster.”
Featured image of Venice by Marco Bottigelli/Getty Images
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