Private Equity Hunts for Al-Proof Deals in Italy’s Factory Belt

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Or sign-in if you have an account.The laser communications telescope used for optical communication testing and system validation at the test dome of Officina Stellare. Photographer: Clara Vannucci/Bloomberg Bloomberg RSS(Bloomberg) — A 250-mile stretch of highway across northern Italy is becoming one of Europe’s richest hunting grounds for private equity. 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Their concrete-paneled factories, set against rolling hills and vineyards, are within reach of a growing army of dealmakers fanning out from Milan, Italy’s finance hub, which sits in between. Private equity giant KKR & Co., direct lending pioneer Ares Management Corp. and advisory Evercore Inc. are among the firms that have opened up shop in the city over the past year with a goal of unlocking opportunities in the private sector. Some are zeroing in on so-called HALO investments — heavy-asset, low-obsolescence companies resistant to disruption from artificial intelligence.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try again“Italy is brimming with small and medium-sized manufacturing companies with little debt, and owned by families that invested heavily in plants and machinery,” said Andrea Bonomi, founder of private equity firm Investindustrial and chairman of its industrial advisory board. At the same time, “you have private equity investors who are underweight industry, and overweight services and software, and they need to re-balance their portfolios pretty fast.” With a reputation for political instability and a heavy public debt, Italy was long ignored by international investors. That’s started to change, aided by Brexit and Premier Giorgia Meloni’s nearly four-year tenure. For those seeking to diversify from prior software and services investments now threatened by AI, Italy is suddenly on the radar. “It’s not so much that the economy has changed, but rather that investor interest in Italy has grown,” said Marco Bellino, partner and head of PAI Partners’ Flagship Fund in Italy. “Italy is an attractive market for investors looking to increase their HALO portfolio exposure.”In May, PAI worked with a local private equity firm to take over Mecaer Aviation Group, a maker of helicopter systems based between Turin and Milan.Officina Stellare SpA — literally “star workshop” — is another example of deals getting done. Giovanni Dal Lago, a lifelong astronomy enthusiast, co-founded the company in 2009 to design and manufacture optical systems for satellites, defense and scientific research.Three years later, the company booked a contract for a joint mission between NASA and the German space agency. It went public in 2019, and earlier this year was merged with Investindustrial’s Global Aerospace Technologies Group in a reverse takeover. The combined company, headquartered northwest of Venice in the foothills of the Alps, now has a market value around €800 million ($916 million).This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.Working with private equity is a challenge, but it’s also “a fantastic opportunity to scale up,” Dal Lago said in an interview. “As an entrepreneur, you need to understand that it’s not about the size of your stake, but what your stake is worth.” Dealmakers are finding Italian companies to be surprisingly competitive, besting Germany’s vaunted Mittelstand by some measures. While Italy’s productivity has stagnated for decades, its manufacturing firms with 50 or more employees add more value per worker than their German and French peers, according to Eurostat data that measures economic output divided by labor input. Exports are on the rise too: Italy was the world’s fifth-largest exporter in 2025, up from eighth a decade earlier, and is vying with Japan for fourth place this year, according to Fondazione Edison, a Milan-based think tank. Despite Italy’s deep industrial base, founders historically have been reluctant to open the door to outside capital, preferring to work with local banks and maintain family control. The penetration rate for private equity or venture capital ownership of non-listed Italian companies is the lowest of any country in Europe — it’s nearly double in Germany, and almost four times higher in France, according to data from S&P Global Market Intelligence.Yet as they near retirement, more founders and second-generation entrepreneurs are starting to listen.Goldman Sachs Group Inc. has quintupled the size of its Milan office over the past seven years, targeting the growing number of lending and investment banking opportunities. “We’ve never seen so many private equity firms in Italy,” said Marco Paesotto, co-head of investment banking in the country. Pitchbook, a financial data and market intelligence platform, counted 679 private equity deals in Italy in 2025, a 16% year-on-year increase. The UK, France and Germany all saw slowdowns. Remaining independent was a reliable strategy when niche producers could rely on a loyal, global customer base. But with trade more complicated and disruptions more common — both geopolitical and technological — an expansive approach has its benefits. SEMA Systems, a tech company that makes automated fire safety systems for trains in Rho, near Milan, has returned to growth after being rescued in 2021 by Chetan Sahai, a former investment banker with career stops at McKinsey & Co., Lazard and GE Capital. Founder Armando Iaquinangelo, who invented a system that increases safety and minimizes false alarms — a critical feature because an erroneous alert can bring a train to a costly halt — continues to collaborate with SEMA. Sahai is taking a structured approach to building the business. After heavily investing in R&D, he now expects to quadruple last year’s revenue by 2027. “We have possibly the best technology in the world,” he said. “We can think big, bring other companies under our umbrella, look beyond Italy and beyond the rail sector for further growth.”For acquirers, Italy’s fragmented manufacturing sector provides fertile ground for buy-and-build strategies, said Eliana Catalano, managing partner at BonelliErede, a Milan-based law firm, who is focused on PE and M&A. Family owners have also become more sophisticated, while bank consolidation in Italy has taken away some financing options for mid-market companies to solve succession or family-stake issues, said PAI’s Bellino.Despite the renewed activity, significant structural weaknesses remain. Italy’s energy costs are among the highest in Europe, while red tape and lengthy legal processes continue to deter investment.Then there are the perennial obstacles, from parochialism to regulatory complications, that have slowed cross-border dealmaking on the continent. In Italian aerospace and defense, “everyone took comfort in the small-is-beautiful mindset,” and many potential mergers were held back by personal rivalries, said Alessandro Franzoni, chief executive officer of Officina Stellare. “But our market is changing fast and it’s becoming increasingly European.”The A4 corridor has long been part of Europe’s economic backbone — the so-called Blue Banana stretching from southern England across the Channel, down through the Netherlands, Belgium, Germany’s Rhine Valley and Switzerland to the northern section of Italy below the Alps. Northern Italy began industrializing in the late 19th century, making use of cheap electricity generated from Alpine reservoirs. After World War II, factories sprang up to fill those plains. While national champions such as Fiat downsized and chemical giant Montedison faltered, in recent decades thousands of smaller manufacturers have carved profitable niches in global markets. Italy’s export rise over the past number of years has been driven by pharmaceuticals and precision machinery companies, while more traditional sectors such as textiles and furniture slowed, according to the Fondazione Edison report. Italians have “fantastic analog businesses” — they are exceptionally good at making things with their hands and with machines, said Maurizio Tamagnini, CEO of FSI, which invests in Italian companies.“Now they need to crossbreed those strengths,” he said. “If they do so they will succeed also in the new AI economy.”At Officina Stellare, the old and new manage to coexist. Testing its laser communications technology for satellites involves beaming optical signals to a mountain cottage 7 miles away — at the edge of the Asiago mountains, where the cheese comes from. “Testing is going great,” Dal Lago said. “The only problem we have right now is the occasional cow wandering past the receiver.”—With assistance from Sonia Sirletti and Michael Ovaska.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.