Ares Management leads private credit drive in Italy

Global private credit firms, led by Ares Management, are increasingly focused on Italy as small family-owned businesses, the backbone of the Italian economy, open up to outside investors and create buyout opportunities, Reuters reported on August 5, 2024. Deloitte data shows that Italy accounts for just 4.3% of continental Europe's overall direct lending transactions, with 140 deals completed over the past 45 quarters. Growing competition in Europe, where traditional banks are reclaiming a share of the syndicated loan market and pressuring returns, is increasing the appeal of new growth markets such as Italy.

Tyrone Cooney, a partner at Ares Management Credit Group in charge of France and southern Europe, described Italy as "the new frontier for direct lenders" due to its growing relevance for mid-market private equity firms. Ares, which manages $428 billion globally, has completed three Italian deals of between 50 million and 150 million euros in recent months. Cooney said competition in Italy is rising but remains less intense than in the UK, France and Benelux. He added that new entrants include mid-market private equity funds Ares previously partnered with in the Netherlands, France, Britain and Scandinavia.

The Italian private equity market is expanding as family-owned companies, many of which compete globally despite their small size, increasingly sell stakes to private equity as owners age. The Italian industry association AIFI recorded 224 private equity investments in family-owned firms in 2022, compared with 151 four years earlier. Pan-European firms are also establishing local presence: France's Montefiore Investment opened a Milan office in September 2022 and acquired a majority stake in luxury retail general contractor EXA in 2023, its first Italian deal. London-based A&M Capital Europe plans to open a Milan office early next year.

London-based Pemberton, a private credit manager, arranged three Italian deals this year, including financing for fund Ambienta's buyout of engineering group Officine Maccaferri, where JPMorgan, Intesa Sanpaolo and UniCredit provided shorter-dated financing covering 40% of the total. Francesco Di Trapani, senior adviser at Pemberton, said Italy typically offers five to 10 deals above the 100 million euro threshold Pemberton targets, with each fund receiving two or three such deals a year.

Deloitte partner Claudio Scardovi cautioned that Italy's credit market faces hurdles, including a lack of domestic investors to co-invest alongside large international players such as Ares. Scardovi said domestic direct lenders proliferate but often struggle to raise capital because of their single-country focus and below-scale size. Ares declined to ...