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The Law Reviews
Fusioni e Acquisizioni, Private Equity

The Mergers & Acquisitions Review – Fourteenth edition

I. Overview of M&A activity

In 2019 there was a record number of completed M&A transactions in Italy (1,085 compared to 991 in 2018), ‘celebrating a decade of uninterrupted growth in volumes’. [1]

The overall value of the deals, however, decreased, with an aggregate value of €52.4 billion in 2019 compared to €93.3 billion in 2018. It should be noted that the 2018 figures (the best since 2008) were high due to the closing of two exceptionally large deals (i.e., the combination of Essilor SA and Luxottica spa and the acquisition of Abertis Infrastructures SA by Atlantia spa, ACS SA and Hochtief AG), both announced in 2017 and completed in 2018, with a combined value of roughly €40.6 billion. Excluding these two deals, the 2018 M&A market value would have been equal to €53.3 billion, just above the 2019 figures.

The Italian M&A market in 2019 was in line with global M&A business, which saw 36,834 completed transactions (+1 per cent on the previous year) generating values of US$3.112 billion (down 12 per cent on 2018).

In 2019, private equity and venture capital funds in Italy achieved very positive volumes (+31 per cent on 2018) with a decrease, however, in terms of value, down to around €6 billion (€11.8 billion in 2018).


II. General introduction to the legal framework for M&A

The basic statutory rules applicable to M&A transactions in Italy are set out in the Italian civil code. However, other laws and regulations can apply to Italian deals depending on a number of factors such as the fact that one of the parties involved is a listed company [2] , the economic sector (if regulated [3] or strategic [4]), the turnover of the parties involved (which may have a relevance for antitrust purposes [5]) and the interest of certain stakeholders (such as employees [6]).

In general, the Italian M&A legal framework is comparable to that of other European civil law countries, and legal structures and documentation are largely influenced by international practice. Not unlike other countries, there are two basic structures that can be used to purchase a business in Italy: the acquisition of all or part of the shares [7] making up the corporate capital of a target company from its shareholders (share deal), or the acquisition of all or substantially all of the assets from a target company (asset deal).[8]

i. Share deals

In a share deal, the buyer will acquire an equity interest in the target company and the target company will retain all of its known, unknown and contingent liabilities.

Although Italian law regarding the sale of shares provides buyers with a basic set of warranties, the prevailing case law shows that these warranties only refer to the (direct) object of a purchase, that is, the shares that are being transferred and not the assets of the underlying target company. This is the key reason why it is customary, in a share deal, that the seller gives the buyer an elaborated set of additional representations and warranties to assure certain qualities of the target company and its assets.

ii. Asset deals

Article 2555 of the civil code defines a business as ‘the aggregate of assets organised by an entrepreneur for conducting a business activity’. Therefore, the two elements that may be found in the legal concept of business are:

a. the material element, consisting of an aggregate of assets, to be interpreted in a broad sense (thus including tangible assets, intangible assets and contractual relationships); and

b. the functional element, consisting of the organisation that transforms the aggregate of single assets into a nexus of items functionally connected to each other and likely to become – as a whole – an instrument for carrying out a business activity.

Given the definition of business set out in Article 2555 of the civil code, it is sometimes debateable whether the proposed transfer of certain assets may be actually characterised as a transfer of a business or a mere transfer of single assets. This question – which is a factual question and cannot be solved on a theoretical basis – is key because, depending on the characterisation of the proposed transaction, the statutory rules applicable to it can be significantly different. In particular, when a business is transferred from one company to another, notwithstanding any allocation of the transferring entity’s liabilities contained in the relevant agreement, the acquiring entity may – under certain circumstances – find itself (jointly) responsible, by operation of law, for certain liabilities of the transferring entity even though these liabilities were explicitly retained by the latter.

Below is a brief list of the main liabilities of the target company for which the buyer may find itself liable in an asset deal, despite any attempt to cherry pick:

a. Liability for debts: pursuant to Article 2560 of the civil code, the buyer will be jointly and severally liable for debts incurred by the seller prior to the completion of a transaction to the extent that such debts are recorded in the statutory accounting books of the seller. The debts referred to in Article 2560 of the civil code are only the ‘mere debts’, which are: tort liabilities, liabilities arising from contracts that pose obligations only on the seller and liabilities arising from bilateral contracts for which the third party has already performed its obligations.

b. Liabilities under Legislative Decree No. 231 of 8 June 2001: pursuant to the Legislative Decree, a company can, under certain circumstances, be held directly liable for any criminal offence committed in its interest or to its own benefit by those entrusted with representative, administrative or managerial duties (e.g., directors and executives), or by any person who is subject to their supervision and authority (e.g., employees, contractors, agents). The liability deriving from crimes committed prior to fundamental corporate changes (e.g., mergers, split-ups, transformations, the acquisition and contribution of assets) is transferred by operation of law to the surviving entity. In particular, Article 33 of the Legislative Decree extends this liability to the acquiring company in the case of the sale of a business unit, but only within the business’s value and limitedly to pecuniary fines.

c. Liabilities towards the employees: see Section VII.

d. Social security liabilities: according to Italian Supreme Court decision No. 8179 of 16 June 2001, the social contributions due, but not paid, by the seller at the time of the completion of the proposed transaction are treated as debts pursuant to Article 2560 of the civil code.

e. Tax liabilities: see Section VIII.

iii. Mergers

The civil code provides that mergers may take place either through the set-up of a new company or the absorption of one company into another.

The regulation of mergers is contained in Articles 2501 to 2504 quater of the civil code and a simplified procedure is set out in Articles 2505 and 2505 bis addressing mergers by incorporation of wholly owned companies and mergers by incorporation of 90 per cent-owned companies. These civil code rules are mostly designed to establish a process by which a merger takes place aimed at protecting the right of the shareholders of the merging companies to take fully informed decisions on the merger, as well as protecting the creditors of the merging companies in the event that their interests are jeopardised by the merger itself.

iv. Leveraged Buyouts

In general, in leveraged buyout (LBO) transactions, the purchasing company acquires the entire (or a controlling interest in the) corporate capital of the target company through the following structure:

a. the buyer incorporates a special purpose vehicle company (newco);

b. the newco enters into a debt financing arrangement to pay the price for the acquisition of the target company and the other transaction costs;

c. the newco acquires the entire (or a controlling interest in the) corporate capital of the target company; and

d. the newco is merged by absorption into the target company (or the opposite, but usually the target company is the surviving company).

In LBO transactions, target companies must have solid financials, an adequate degree of leverage and a high capacity to produce cash flow, since the indebtedness of the newco will be transferred to the target company as a consequence of the merger and, thus, will be repaid with the cash flows generated by the target company.

Until 2003, based on case law and the opinions of noted scholars, LBO transactions were not allowed in Italy on the basis of an extensive reading of Article 2358 of the civil code, which prohibits the granting of loans and the entering into financings for the purchase of own shares. A 2003 reform of Italian corporate law[9] removed doubts as to the legitimacy of LBO transactions provided that certain requirements are met. In particular, LBO transactions are legitimate if the directors of the companies involved in a merger prepare an economic and financial plan regarding the sustainability of the indebtedness of the company resulting from the merger and the reasonableness of such evaluation is confirmed by an independent expert appointed by the competent court.


III. Developments in corporate and takeover law and their impact

No major changes have been made to Italian M&A laws in recent years. However, in 2020, the covid-19 pandemic has led to a further and important extension of the scope (and interpretative uncertainty) of the golden power regulation.

The golden power is mainly governed by the Decree No. 21/2012 and the Golden Power Law,[10] which grants the government the power to veto or to impose restrictions on concentrations concerning Italian companies or businesses operating in certain sectors deemed strategic for the Republic of Italy (defence, national security, energy, transportation, communications, 5G technology).

Law Decree No. 105 dated 21 September 2019, introduced into the law by Law No. 133 dated 18 November 2019, has expanded the scope of the golden power rules to include the sectors laid down in Article 4, Paragraph 1, Letters a and b, of Regulation (EU) 2019/452 (i.e., critical infrastructures and critical technologies and dual use items). More recently, the obligation was extended also to the other sectors laid down in Article 4, Paragraph 1 of the same EU Regulation (critical productive factors, sensitive data, media liberty and pluralism, steel and agri-food).

Pending the issuance by the Prime Minister of decrees which should specify in detail the strategic activities included in the sectors covered by Article 4(1) of Regulation EU/2019/452, significant legal uncertainty for private operators and practitioners remains, which has led to a significant increase in notifications to the Prime Minister’s office.

Moreover, Law Decree No. 23 of 8 April 2020 has recently expanded the scope of the golden power rules, imposing, up until 31 December 2020 and in light of the covid-19 emergency, an obligation to notify the purchase of shareholdings in Italian companies on EU entities (and not only on non-EU entities) for the majority of the sectors involved.

The number of transactions assessed by the government increased significantly in 2019 compared to previous years (83 notifications against 48 in 2018, 30 in 2017, 14 in 2016). In 2019, out of 83 transactions, the government made use of its special powers only in 13 cases, all of which were allowed, subject to conditions.

Failure to notify is heavily sanctioned. In particular, unless the facts constitute a crime, a violation of the notification obligation entails the application of a monetary administrative fine up to twice the value of a transaction and, in any case, not less than 1 per cent of the cumulative turnover of the companies involved.


IV. Foreign involvement in M&A transactions

Cross-border transactions completed in 2019 amount, in terms of volume, to 514 deals (47 per cent of the total) and, in terms of value, €39 billion (75 per cent of the total Italian M&A market).

In particular, the breakdown in domestic and cross-border deals in 2019 is as follows:

a. 571 domestic deals with an overall value of €13.4 billion;

b. 197 Italian investments abroad with an overall value of €21 billion; and

c. 317 foreign investments in Italy with an overall value of €18 billion.

With reference to cross-border deals, and in line with previous years, the majority of Italian investments abroad in 2019 (123 deals, representing 62 per cent of the total volume) were in respect of companies located in the EU (in particular, France, the UK, Germany and Spain). The majority of foreign investments in Italy were carried out by EU economic actors (179 deals). North America was second, with 75 deals, and Asia-Pacific was third with 32 deals. Chinese investment in Italy, although its value almost tripled compared to 2018, saw a decrease of 50 per cent on 2018 in terms of volume.


V. Significant transactions, key trends and hot industries

The cumulative value of the top 10 deals completed in 2019 amounted to €23.9 billion, equal to 46 per cent of the entire Italian M&A market.

The top ten Italian deals were as follows:

a. one deal was a domestic deal (placed in fifth position);

b. six deals were Italian acquisitions abroad; and

c. three deals (one of which placed in first position) were foreign investments in Italy.

The five most important deals in terms of value in 2019 were the following:

a. the acquisition by KKR Kohlberg Kravis Roberts & Co LP, a US private equity fund, through its subsidiary CK Holdings Co Ltd of Magneti Marelli spa, an Italian company active in the supply of automotive components, totally owned by Fiat Chrysler Automobiles NV, was closed on 2 May 2019 for €5.8 billion;

b. the acquisition of the upstream assets, including the ownership interests in more than 20 producing fields in the North Sea and the Norwegian Sea, of ExxonMibil Corp, one of the largest US groups in the global energy sector, by Vår Energy AS, a Norwegian company owned by the Italian company Eni spa and the private equity fund HitecVision, which closed on 10 December 2019 for US$4.5 billion;

c. the acquisition by Eni spa of 20 per cent of Abu Dhabi Oil Refining Co, a refining company of the Abu Dhabi National Oil Company, the United Arab Emirates’ national oil company, which closed on 31 July 2019 for US$3.24 billion;

d. the initial public offering on the Italian stock exchange of Nexi spa, the PayTech leader of the Italian digital payment sector, promoted by Merkury UK Holdco Ltd (a vehicle controlled by Advent International, Bain Capital Private Equity and Clessidra SGR) and several Italian banks, which was followed by the institutional placement of 36.4 per cent of its corporate capital for €2.4 billion; and

e. the two accelerated book-building procedures for ordinary shares of the corporate capital of the Italian bank FinecoBank spa, one of the major private banking operators in Italy, subsidiary of the Italian bank Unicredit spa, which were closed on 8 May and 8 August 2019 for an overall amount of €2.1 billion.

An analysis of the economic sectors involved shows that the 2019 top 10 deals includes nearly all economic sectors as follows:

a. financial services recorded 84 deals for an overall value of €10.9 billion;

b. energy and utilities recorded 90 deals for an overall value of €10.8 billion;

c. consumer markets recorded 361 deals for an overall value of €10.1 billion;

d. industrial markets recorded 225 deals for an overall value of €9.2 billion;

e. support services and infrastructures recorded 144 deals for an overall value of €6.6 billion; and

f. telecommunications, media and technology recorded 181 deals for an overall value of €4.7 billion.

With reference to deals involving an Italian target company, the following sectors were involved the most: financial services, consumer markets, and telecommunications, media and technology. Cross-border deals included industrial markets, support services and infrastructures, and energy and utilities.


VI. Financing of M&A: main sources and developments

The main sources of funds for Italian M&A are made up of cash in hand (i.e., existing cash owned by the buyer) and by various equity and debt instruments from financial markets or by specific operators.

The reform of Italian corporate law[11] has considerably expanded the range of financial instruments that are available in Italy. In particular, it is now possible to issue equity instruments with characteristics that are partly similar to those of debt and vice versa, as well as to issue instruments of a hybrid nature (participative financial instruments) that, depending on their concrete characteristics, are recognised as debt or quasi-equity.

In addition, in more recent years, regulatory and tax changes have been introduced allowing a further expansion of the financing instruments available to Italian companies. In particular, the Competitiveness Decree of 2014[12] allows Italian insurance companies and Italian securitisation vehicles (i.e., companies incorporated under the Italian securitisation law) to engage in direct lending to Italian borrowers. In addition, Legislative Decree No. 44 of 4 March 2014 made it possible for Italian alternative investment funds (AIFs) to invest in credit by granting facilities. Moreover, in 2016,[13] European AIFs were authorised to invest in credit (also in the form of direct lending) in Italy.

Notwithstanding the above, the use of bank debt still appears to be the most widespread source of financing in the Italian M&A market, and Italian or international banks are the main players as lenders.

The legal documentation concerning acquisition financing is usually governed by Italian law in cases where a transaction is local and both the buyer and the lenders are Italian. If international buyers or lenders are involved or if the size of a deal is significant, the financing is commonly subject to the law of England and Wales.


VII. Employment Law

An M&A transaction often involves complex employment issues related, as the case may be, to identifying the personnel in the business to be transferred as a going concern (in the case of an asset deal), as well as the management of potential redundancies.

As regards an asset deal, the following aspects have to be considered:

a. the restrictions set out in TUPE,[14] which is implemented in Italy by Article 2112 of the civil code;[15] and

b. union information and consultation rights under Article 47 of Law No. 428 of 1990.

With reference to the first aspect, in particular, Article 2112 of the civil code provides that, in the case of an asset deal, the buyer and the seller cannot freely determine the employment agreements that shall be included in, or excluded from, the scope of the transaction. Cherry picking is not permitted since employees working exclusively or primarily for the business to be transferred are entitled to continue their employment with the transferee, and consequently the exclusion of such employees from the scope of the transaction requires employee consent and the correct sharing of information with trade unions. The TUPE protections can only be derogated from in the context of a transfer within an insolvency procedure provided there is the agreement of the union.

With reference to the second aspect, in the case of an asset deal, the timetable for the transaction has to take into consideration the right of unions to be consulted within Article 47 of Law No. 428 of 1990, which – for companies encompassing more than 15 employees – requires the transferor and the transferee to carry out an information and consultation procedure before implementing the transaction. In particular, the parties must give written notice of the proposed transfer to the internal work councils (if any) and to the unions that have executed the collective bargaining agreements applied to the relevant target company. Notice shall be given at least 25 days before the actual date of the transfer or, if earlier, the date on which the parties have reached a binding arrangement on the transfer. The addressees of the notice may, within seven days from receipt of the notice, request that a meeting is held to examine the transaction. Should an agreement not be reached at the end of the consultation procedure, this does not block the transaction: the procedure shall be considered terminated after 10 days, considering that the only obligation cast upon the transferor and the transferee is to provide the above-mentioned information, and to provide it in good faith.

With regard to potential redundancies in the target company or the line of business being transferred, it is unlikely that they can be manged by the seller before the completion of the transaction due to the timing, costs and risks connected with the implementation of the collective dismissals procedure. In addition, it is unlikely that the seller has full knowledge of the buyer’s plans. Therefore, redundancies and the relevant costs have to be evaluated by the buyer in connection with the economics of the transaction, as well as in assessing any organisational impacts that might arise from the implementation of the restructuring plan.

In respect of pending M&A transactions and redundancy plans, the Covid-19 Law adopted in Italy has introduced a general ban on dismissals (for both individual and collective procedures). This ban has been recently extended by the August Decree[16] effective from 15 August 2020. The ban continues to apply to employers:

a. benefiting from the safety nets or discount on social security contributions regulated by the covid-19 legislation until the full use of the weeks provided by the same legislation; and

b. not benefiting from the new safety nets or discounts on social security contributions until 31 December 2020.

The only exceptions to the ban are:

a. the definitive termination of a business consequent to the liquidation of a company without the continuation, even partial, of any activity;

b. the conclusion of a company collective agreement, agreed by the trade unions at national level, that incentivises the termination of an employment relationship on a voluntary basis; and

c. the bankruptcy of a company if a continuation of its activity, even for a limited period, is not envisaged.


VIII. Taw Law

i. Share deals

The capital gain realised on the sale of shares and quotas:

a. if derived by tax-resident individuals that do not hold the shares or quotas in the context of a business activity, is subject to a 26 per cent substitute tax. It is possible to step-up the tax value of the shares or quotas;[17] and

b. if derived by tax-resident companies, is subject to 24 per cent corporate income tax (IRES). Under specific conditions, 95 per cent of the capital gain is exempt from IRES (participation exemption regime).[18]

A transfer is subject to a €200 registration tax and is VAT-exempt. A transfer of shares of joint-stock companies resident in Italy is also subject to a Tobin tax levied at a 0.2 per cent rate. The shares of listed companies whose average market cap in November of the year prior to the transfer was less than €500 million are exempt from the Tobin tax.

ii. LBOs

Interest expenses are deductible up to an amount equal to the interest income accrued in the same fiscal year. The excess amount is deductible up to 30 per cent of the earnings before interest, tax, depreciation and amortisation (EBITDA). EBITDA is computed considering the IRES adjustment applied to the EBITDA calculated from an accounting perspective. If in a fiscal year, there is an excess:

a. of interest expenses over the 30 per cent EBITDA threshold, the excess may be carried forward without a time limitation and can be deducted in the following fiscal years if net interest expenses accrued in that year are less than 30 per cent of EBITDA; and

b. of 30 per cent of EBITDA over the net interest expenses, such excess may be carried forward without amount limitation and may be used to increase the relevant threshold in the following five fiscal years.

Loans are transactions relevant from a VAT perspective even if they are VAT-exempt. If a loan is executed by notarial deed or private deed with notarised signatures, it must be registered with the tax authorities and is subject to a €200 registration tax.

Loan guarantees are in some cases subject to a 0.5 per cent registration tax,[19] and where there is a mortgage, also to a 2 per cent mortgage tax. However, medium and long-term financing executed in Italy and granted by a qualifying lender, upon election of the lender, are exempt from any indirect tax[20] (registration, cadastral, mortgage, governmental concession tax and stamp duty), also in relation to all deeds, documents, agreements and formalities inherent in the financing (including any guarantee of whatever nature granted by any person). The election implies that the financing transaction is subject to a 0.25 per cent substitute tax on the amount lent.

iii. Mergers

A merger is a tax-neutral transaction that does not give rise to taxable gains or to deductible losses on the assets of the merging companies. The company resulting from the merger takes the same tax basis in the assets and liabilities as those before the merger, and therefore there is no step-up in the tax value of assets.

Tax losses (as well as the interest expenses and notional yield on the net equity (ACE) not deducted) incurred by the merging companies before the merger may be carried forward by the company surviving the merger under certain conditions.[21] If these conditions are not met, the company resulting from the merger may apply for an advance tax ruling with the tax authorities to obtain the carry forward of the tax losses.

In genuine LBO transactions, tax authorities consider that the conditions to carry forward tax losses (and interest expenses and the notional yield on the net equity not deducted) are generally available. In any case, the advance tax ruling has to be submitted to avoid the application of penalties.

Mergers (as well as demergers and contributions of going concerns) allow for a step-up in the tax basis of the underlying assets of the merged companies (including goodwill) through the payment of a substitute tax levied at a rate ranging from 12 to 16 per cent.[22]

iv. Asset deals

The transfer of a business may take place through a direct transfer or indirect transfer (i.e., contribution in kind into a newco and subsequent transfer of the shares or quotas in the newco).

In the first case, the capital gain arising from the transfer of a business, if derived by tax-resident companies, is subject to 24 per cent IRES. A sale of a business is excluded from VAT and is subject to proportional registration tax at the rates applicable to each asset forming the business. The purchase price becomes the tax basis of the assets in the hands of the buyer.

The contribution of a business executed by a tax-resident company to another tax-resident company is tax-neutral and therefore:

a. it does not give rise to any taxable gain or deductible loss in the hands of the contributor;

b. the tax basis of the contributed business is rolled over to the shares or quotas received in exchange by the contributor; and

c. the tax basis of the assets and the liabilities transferred to the receiving company is identical to the one in the hands of the contributor, prior to the contribution. It is possible to step-up the tax basis of the assets (see subsection iii above related to the mergers).

The contribution of a business is not subject to VAT but to a €200 registration tax.

Any capital gain realised on a sale of shares or quotas is subject to 24 per cent IRES, but the participation exemption regime can be applied (see earlier text related to the transfer of shares or quotas). The transfer of shares or quotas is subject to a €200 registration tax and is VAT-exempt.

According to the current regulatory framework, the contribution of a business followed by the subsequent sale of the shares or quotas of the transferee company is not to be recharacterised as a direct transfer of a business[23] (from both direct and indirect taxes) except for the case of application of the anti-avoidance provisions.

Regarding asset deals, it is worth mentioning that pursuant to Article 14 of Legislative Decree No. 472 of 18 December 1997, the seller and the buyer will be jointly and severally liable for:

a. taxes and sanctions originating from violations incurred in the two years preceding the completion of the transaction and during the year in which the business is sold; and

b. violations that are reported during the same period of time, even if they occurred in previous years.

The buyer’s liability will accrue only for debts assessed until the date of transfer and will be limited to an amount equal to the value of the contributed business unit. However, pursuant to Article 14, Paragraph 3, of Legislative Decree No. 472 of 18 December 1997, the Italian tax authority – upon request – will issue a certification of the amount resulting from violations or debts reported by the tax authority until the time of the request. The buyer who relies in good faith on such certification is shielded against the tax liabilities of the seller that are not reported therein. Therefore, if the certification does not report any notifications of violations or assessments of debts, then the buyer is exempt from any tax liabilities of the seller; if the certification does report some notifications of violations or assessments of debts, then the buyer might be held jointly liable only for the tax liabilities reported in the certification and no more.


IX. Competition Law

Under Italian competition law (Law No. 287/1990 (IAL)), any transaction amounting to a concentration and meeting the relevant turnover thresholds must be notified to the Italian Competition Authority (ICA).

Pursuant to Article 5(1) of the IAL, the following transactions are considered notifiable concentrations:

a. mergers between two or more previously independent undertakings;

b. acquisitions of sole or joint control over an undertaking or parts thereof, whether through the acquisition of shares or assets, or by contract (e.g., shareholders’ agreements) or by any other means; and

c. the establishment of a concentrative joint venture by two or more undertakings.

A concentration must be notified where the following two thresholds are cumulatively met (with the latest annual value update taking effect on 23 March 2020): the aggregate Italian turnover of the undertakings concerned exceeds €504 million, and the Italian turnover of each of at least two undertakings concerned exceeds €31 million.

The law does not require a standstill obligation: the concentration must be notified to the ICA prior to its implementation, but it may be closed at any time once the notification has been submitted without waiting for the relevant clearance. Nonetheless, it is common practice not to proceed with the implementation of the concentration prior to the clearance in order to prevent a possible forced restoration of the conditions existing prior to the consummation in cases where the ICA prohibits the concentration.

The ICA may prohibit a transaction when it creates a serious impediment to competition (through the constitution or strengthening of a dominant position), may authorise it with conditions when remedies are considered necessary to correct certain distortive effects that the transaction might create, or may authorise it tout court.

The number of notifications has significantly dropped following Law Decree No. 1/2012, which made the two turnover thresholds triggering notification cumulative. In 2019 the ICA examined 65 transactions (against 73 notifications in 2018). Out of 65 concentrations, in 2019 the ICA opened Phase II proceedings (i.e., an in-depth investigation for problematic cases) only in six cases, five of which were approved subject to conditions. From the introduction of the IAL in 1990, the ICA has prohibited only a dozen notified transactions.

The ICA has the power to open an investigation for failure to notify a concentration prior to its implementation and to impose fines for an amount up to 1 per cent of the worldwide turnover realised in the last fiscal year by the undertakings responsible for an infringement. Fines for failure to notify have been traditionally low (usually amounting to €5,000). More recently, however, the ICA has showed its willingness to impose tougher sanctions on the assumption that there is a widespread knowledge of the competition rules and the significant drop in notifications.

In 2019, the ICA published a report on big data where it expressly stated that the repression of abusive behaviour by the major players in the digital economy is one of its priorities for enforcement. With respect to merger control, the ICA has underlined that certain transactions, mainly concerning acquisitions by dominant operators of potentially disruptive startups (killer acquisitions) may not be subject to the ICA’s competence. This has started a debate both within the ICA and politically as to whether change is needed. The debate is complicated by the September 2020 declaration of the European Commission that changing thresholds may not be the best way forward. Change cannot be expected in the short term.


X. Outlook

The first half of 2020 was characterised by the global covid-19 health emergency, which has had a negative impact on the world economy and, in particular, on the Italian economy.

In the first three months of 2020, the Italian M&A market has only been partially affected by covid-19. 2020 started positively. The first signal of decline was only seen in March when many deals were put on hold, postponed or cancelled.

Over the first quarter of 2020, 231 deals were closed (18 more compared to the same period of 2019) for a value of roughly €9.2 billion, especially through the completion of the integration of Vodafone Italia spa’s towers business (Vodafone Towers srl) into Inwit (Infrastrutture Wireless Italiane spa) in March 2020.

In the second quarter of 2020, three important deals were announced:

a. the acquisition by BC Partners LLP, a leading investment firm, of approximately 20 per cent of SOFIMA spa, the controlling shareholder of IMA spa, with the consequent launch of a mandatory tender offer aimed at the delisting of IMA spa (€2.93 billion);

b. the merger between Nexi spa, the Italia leader in the sector of digital payments, and SIA spa, the Italian and European leader in payment technology and infrastructure services, controlled by Cassa Depositi e Prestiti (€15 billion); and

c. the acquisition by Euronext of the entire share capital of Borsa Italiana spa, currently controlled by London Stock Exchange Group Holdings (Italy) Limited (€4.325 billion).

Italy has been one of the countries worst-affected by the covid-19 pandemic in Europe. The epicentre of the outbreak took place in the northern regions of Lombardy, Veneto and Emilia-Romagna, which represent the country’s industrial and economic heartland. It is difficult to foresee how and when the emergency will end and the extent of covid-19’s impact on the Italian and global M&A markets. At the moment, the outlook for global growth for the rest of 2020 is negative; a deep recessionary environment is expected, but with recovery in 2021.


Pietro Zanoni and Eleonora Parrocchetti are partners at Nctm. The authors would like to thank Roberta Russo, Manfredi Luongo, Francesco Mazzocchi and Valentina Salvadori for their contributions.



[1]All the data regarding the value and volume of M&A transactions on the Italian market referred to in this chapter is based on the recent KPMG 2019 M&A report ‘Rapporto Mergers & Acquisitions. Record di operazioni in Italia. Anno 2019’.
[2]See Legislative Decree No. 58 of 24 February 1998 (Italian Financial Act), and regulations issued by the National Commission for Companies and the Stock Exchange (Consob), in relation to transactions that involve, as a target, publicly listed companies or companies subject to the supervision of Consob.
[3]As an example, if a target company is an insurance company or a bank, the transaction shall be subject, respectively, to IVASS (the Institute for the Supervision of Insurance) authorisation pursuant to Article 68 and ff of Legislative Decree No. 209 of 7 September 2005 or to the Bank of Italy authorisation pursuant to Article 19 of Legislative Decree No. 385 of 1 September 1993.
[4]See Decree No. 21/2012, which grants the government with ‘golden power’ when a target operates in certain sectors deemed strategic.
[5]See Law No. 287 of 10 October 1990, on the protection of competition, addressing the turnover of the concentration achieved by an M&A transaction.
[6]See Article 47 of Law No. 428 of 1990, which provides for unions’ consultation rights in relation to asset deals involving companies with more than 15 employees.
[7]The term shares here is meant to include the units of equity ownership interest in both an spa and a limited liability company (srl).
[8]Although an asset deal may involve the transfer of a division or a line of the seller’s business, for simplicity this chapter refers only to the sale of an entire business of a seller.
[9]Legislative Decrees No. 5 and 6 of 17 January 2003.
[10]The Golden Power Law, Law No. 56/2012.
[11]Legislative Decrees No. 5 and 6 of 17 January 2003.
[12]Law Decree No. 91 of 24 June 2014, converted into Law No. 116 of 11 August 2014.
[13]Law Decree No. 18 of 14 February 2016, converted into Law No. 49 of 8 April 2016.
[14]Directive 2001/23/EC.
[15]Article 2112 of the civil code provides that (1) the employment relationship continues with the transferee, without any interruption and without affecting the rights accrued by employees until the effective date of the transfer; (2) after the completion of the transaction, the transferee must apply the economic and legal treatments set out by the national, territorial and company collective bargaining agreements applicable to the transferred employees in force at the time of the transfer until they expire, unless they are replaced by collective bargaining agreements applied by the transferee; (3) the transfer of an undertaking does not constitute a reason for the dismissal of the affected employees; and (4) should the transaction substantially affect employees’ working conditions, the employees can legitimately resign within three months from the transfer’s effective date.
[16]Decree Law No. 104/2020.
[17]Article 137 of Law Decree No. 34/2020 has envisaged a one-off opportunity for resident individuals and non-resident entities upon election to step-up the tax value of participations in unlisted companies owned as of 1 July 2020 by paying an 11 per cent substitute tax on the value of a participation by 15 November 2020, certified by a sworn appraisal by the same date. In the past, this elective regime has been introduced several times on an annual basis.
[18]The application of the participation exemption requires that the participation is owned from the first day of the 12th month prior to the sale; the participation is classified as financial fixed assets in the first financial statements closed during the period of ownership; the company is resident for tax purposes in a white list country; and the company actually carries out a business activity.
[19]Registration tax at a 0.5 per cent rate is due in relation to a guarantee released in favour of third parties. Guarantees granted by the same debtor are subject to €200 registration tax.
[20]Article 15 and following of Presidential Decree No. 601/1973.
[21]According to Article 172, Paragraph 7 of Presidential Decree 917/86, the merged company has to book in its profit and loss related to the fiscal year before the merger both gross proceeds and labour costs greater than 40 per cent of these items’ average, registered in the two previous fiscal years (vitality test). Moreover, the carry forward is capped to the value of net assets of the merged company as resulting from either the last annual financial statements approved before the merger or the financial statements prepared in the context of the merger, whichever is lower. The net asset value is computed excluding equity injections made during the 24 months prior to the date to which those financial statements refer.
[22]Substitutive tax is applied at the following rates: 12 per cent on the portion of the step-up in value up to €5 million; 14 per cent on the portion of the step-up in value between €5 million and €10 million; and 16 per cent on the portion of the step-up in value that exceeds €10 million.
[23]Article 20 Presidential Decree 131/86, as amended by Article 1, Paragraph 87 of Law 205/2017.


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