International Corporate / M&A

International Corporate / M&A - Italy

posted 2 years ago

Author

Edoardo Colla

Firm:Colla Di Piazza Studio Legale
Country:Italy
Practice Area:M&A

1. Please summarise the work your firm does and the ways in which you distinguish yourself in the provision of corporate / M&A advice.

The law areas in which our Firm provides its assistance are, primarily, international and corporate law, with particular emphasis on M&A, corporate governance and cross-border trade agreements. The Law Firm is composed by lawyers who have acquired significant experience in other leading Italian law firms. Thanks to such experience, they are able to offer a high-standard level of specialist skills to the clients, maintaining a strong focus on the main commercial goals of each client.

Over the last few years, in addition to numerous transactions in the retail sector (assisting some of the leading Italian corporate groups, also participated by foreign Private Equity funds) we have assisted well-known foreign companies in their investments in the corporate capital of certain Italian targets.

We understand the high-quality expectations of leading companies (also with regard to the timing in completing the transaction) because they are our main clients and so we pay close attention in any stage of the transaction or investment.

2. Please outline the state and scope of corporate legislation in your jurisdiction. How does the legislation differ to that of neighbouring jurisdictions? Are there any unique complexities?

Italy is included in the nineteen countries of the European Union that have a codified legal system also regulating corporate matters (principally included in the so called “Italian Civil Code”). The complexity of such corporate matters and the breadth of special cases (even in terms of special corporate by-laws provisions) has required an integration to such codified regulation by Notarial “rulings”, which consists of written opinions issued by Italian Notary councils on specific corporate topics. Such “opinions”, although not constituting a written official source of law, have assumed great relevance in handling Italian corporate matters.

There are so many corporate legislation complexities in Italy (as for example the different codified systems of corporate governance for the “Società per Azioni”) that only an in-depth knowledge of them allows us to assist the client in reaching its effective aims.

3. What does your current workflow look like – and what sort of corporate matters are clients bringing to you in the present climate? Why do you think this is?

Over the last 12 months we assisted a lot of clients in (i) completing their investments/acquisitions and (ii) in customising the bylaws of their companies taking into consideration the different needs and characteristics of each shareholder and the power relationship among them. In recent times, where competition between companies became greater than before, a successful business also passes through a maniacal attention to the details, in any phase and angle of the same business. In this regard, completing a transaction or an investment after having performed a complete due diligence and having negotiated a Share Purchase Agreement or an Investment Agreement with all due protections (even those typical for Italian targets) helps a lot to make the integration more profitable (even in terms of return from the investment) and to avoid unexpected loss. At the same time, having tailor-made corporate bylaws is the first step to not incur any problems during the management of the company and in the occasion of extraordinary events (such as death of a shareholder or intention to sell the shares).

4. If possible, please provide a recent case study demonstrating your service offering on a matter that proved especially noteworthy or challenging.

We’ve recently assisted a primary Portuguese company (part of a corporate group that is a worldwide leader in its business sector) in its co-investment (with an Italian institutional investor) in an Italian subsidiary, aimed to create a new plant for another strategic production line.

In relation to such investment, we negotiated – on behalf of our client – the terms and conditions of the investment agreement with the Italian institutional shareholder (including any provision related to the exit strategy of this latter), the financing agreement and the company by-laws, regulating – according to the Italian law – also the governance mechanism for the company.

Since all investments in Italian companies are governed by local law, even huge international groups (which have their own trusted lawyers) need Italian legal support for all contractual documents and also to better understand some mechanism and/or body typical of the Italian corporate rules.

5. In your experience, how has recent M&A activity been affected by factors such as inflation, supply chain issues, political uncertainty, security risks and/or energy pricing issues?

Firstly, we can note that, due to all such variable components, many Italian entrepreneurs have changed their minds, deciding to sell their assets or to open the share capital of their company in favour of larger and more structured companies or Private Equity funds, or, more generally, to proceed with alliances and joint ventures.

At the same time, for investor/buyers, such context of uncertainty imposes more conservative assessment (also assessing the prospective impact of such variables on the business of the target) also taking into consideration that the cost of debt capital is increased and this element could influence the return of investment.

The legal/contractual implications are mainly focused on CP (condition precedent) provisions and price mechanism clauses (with an increasing use of the earn-out mechanism in the proportion with the aggregate negotiated value).

6. Which sectors are currently experiencing the most deal activity? And what do you think are the main drivers of this?

As consequence of the energy price crisis and government’s commitment to encourage the ecological transition, the energy and utilities sectors have become the most active in Italy during the last year.

Similarly, in the automotive sector, characterised by industry’s continued transition to electric vehicles and by the growth of new innovative technologies, M&A activity has become a vehicle to ensure more resilience in supply chains and to advance technologic and ecologic transformation.

Additionally, the various eco-incentives adopted by the government during the last months have significantly encouraged M&A activity in the infrastructure and construction area.

Italy’s (and Europe’s) aging population and declining birth rate are putting pressure on the healthcare sector, which must adapt by developing innovative products and services, such as telemedicine and home-based care, and finding ways to manage costs.

Thanks to the attractiveness of Made in Italy, the consumers’ sector has also been buzzing with M&A, whose investment trends are mainly represented by promoting D2C (Direct to Consumer) solutions, integration into its own portfolio of brands and products (firstly in sustainability and wellness areas) that can attract consumers’ interest, but also by geographic expansion and access to new markets.

Finally, Industry 4.0 is now offering the biggest M&A opportunities in the industrial sector, where pandemic experience has led entrepreneurs to repair business models and has fostered a faster transition to digital, with manufacturers increasingly interested in technology solutions and services that improve ordinary management.

7. In recent times, have you worked more with large firms or SMEs (or a mixture of both)? What do you feel are the reasons for this?

Our Law Firm counts both large companies and SMEs among its clients and provides a targeted and tailor-made legal advisory service according to the clients’ needs. In recent times, we have been involved in a great number of transactions principally in build-up and expansion projects carried out by large corporate groups (owned by Private Equity funds) but also by small/medium cap companies that have identified the acquisition of smaller competitor (even those that offers complementary service/products) as a solution to grow faster.

After the acquisition we usually assist clients providing ordinary legal assistance to the newly acquired target, also in order to refine what can be improved according to the due diligence report.

8. What kind of counsel do you provide to entrepreneurs to ensure that their business operations are secure?

In M&A transactions or similar, proper legal assistance (in terms of due diligence and contractual documents duly negotiated) is needed to avoid bad “surprises” in the post-closing period and the risk of losing a part or the whole investment.

In the ordinary course of business, starting with a solid legal compliance assessment and revised (by legal specialist) trade contractual models is a great solution to conduct/expand the business in a planned and safe way. Including legal expenses in the year company budget (not only for pending litigation but also as ongoing assistance) is a widespread habit for large companies but, with due proportion, the problems are the same as those affecting smaller companies which, instead, are used to ask for assistance only when a litigation is going to start. So, I usually suggest to any of my clients to budget a fair amount to legally organise its own company and prevent future waste of money (for an amount much greater than those budgeted for prevention).

9. How do you ensure a well-informed global advisory scope for your clients who are based overseas, or have operations in other jurisdictions? For example, are you especially active in network events such as conferences?

Our Law Firm is constantly focused on professional updating through participation to conferences and by using databases that allow constant comparison of legislative innovations and recent rulings of European courts. In any case, our main strength comes from previous experience in cross border transactions, assisting foreign clients in investment or sale related to Italian targets, governed by Italian law. According to our experience, when an agreement is regulated by a foreign law it should be negotiated taking into account the protections (and related waivers possibilities) provided by such national legal system. Indeed, for example, how can I negotiate (to the best of my abilities) the limitations in the indemnity clause (in an M&A transaction) without perfectly knowing which is the perimeter of the warranties already provided by the governing law (that should not be derogated in pejus)?

This is only an example of the importance of having “local” legal assistance (or at least a final double check) when the prospected governing law of the agreement is different from the one known by the foreign client.

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