The new Power of Equity. League Table Top advisors in M&A ranked by deal value. Sovereign Funds What big wallets are looking for in Italy

Transcription

1 C&IB The annual survey with the players' forecast League Table Top advisors in M&A ranked by deal value Sovereign Funds What big wallets are looking for in Vol XXV No. 156 June 214 Spedizione in a.p. - 45% art. 2 comma 2/b Legge 662/96 Filiale di Milano CDP, the state giant with unfinished reserves, will inject some 9 bn by 215 in the economy. Is the balance between private and public players at risk? Giovanni Gorno Tempini is the CEO of CDP The new Power of Equity

2 Vol XXV No. 156 June 214 Spedizione in a.p. - 45% art. 2 comma 2/b Legge 662/96 Filiale di Milano Giovanni Gorno Tempini is the CEO of CDP Contents Your advisor in Corporate Finance acquired a controlling stake in acted as exclusive financial adviser to the Acquirer April 214 have acquired from acted as exclusive financial adviser to the Acquirer December 213 sold its hydraulic components subsidiary WITTUR HYDRAULIC DRIVES S.r.l. to the Management acted as exclusive financial adviser to the Seller September 213 Fineurop Soditic S.p.A. Via S.Margherita, Milano Tel.: Fax.: controlled by acquired from acted as exclusive financial adviser to the Seller April 214 acquired a controlling stake in acted as exclusive financial adviser to the Acquirer October 213 and the Company s Management acquired 1% of from acted as exclusive financial adviser to the Acquirers March 213 ColombiC&E Vol. XXVI - N.156 C&IB The annual survey with the players' forecast CDP, the state giant with unfinished reserves, will inject some 9 bn by 215 in the economy. Is the balance between private and public players at risk? LEAGUE TABLE Top advisors in M&A ranked by deal value THE NEW POWER OF EQUITY Editor and Publisher Paolo Panerai Editor Ettore Mazzotti Contributors Pier Paolo Albricci, Marcello Conti, Domenico Gentile, Mariano Mangia, Stefania Peveraro, Patrizia Morlacchi (analyst) Enrico Redaelli (Art director) Alessandro Villa (Layout) English Text Copy Editor Brigitta Kelliher Translations Studio Kosmos Editorial Assistant Rosalba Pagano President: Paolo Panerai SOVEREIGN FUNDS What big wallets are looking for in Publisher in charge: Gabriele Capolino Co-General Manager: Andrea Mattei Circulation Manager: Maurizio Montanari Subscription Manager: Ilaria Aguzzi Lombard Editori srl via M. Burigozzo, 5 - Milano, Fax , Via S. Maria in Via, 12 - Roma, Fax Subscriptions dep Fax Mailing: AB. Postale Gruppo IV/7 Subscription price (6 issues): Eur 2. Single copies: Eur 33 each prepaid. Copies are sent surface post. For air mail add: Eur 5.16 (Eu), (US-Asia), (Africa), (Australia) Checks payable to Lombard Editori srl. Photolitho: ERRE Creativity Printing: Grafiche Vela via Copernico, 8 - Binasco (Mi) Advertising: Class Pubblicità S.p.A. via Burigozzo, Milano; Fax Executive Chairman: Andrea Mattei VP Sales: Gianalberto Zapponini Chief Marketing Officer: Domenico Ioppolo Group Publishing Newspapers: Francesco Rossi Sales General Director: Stefano Maggini Manager in charge: Luca Ronzoni Registrazione presso il Tribunale di Milano No. 577 del 7/8/1987 >> Survey - Corporate&Investment Banking 3 Trend Forum: The opinions of top bankers. Is a new season coming? An outlook of the strategic segments of the maket: advisory, debt, equity by Pier Paolo Albricci 34 M&A Rising numbers for and the league table of top advisors by amount and deal numbers by Stefania Peveraro 52 Equity CM And then came the time to reap Thanks to the announced IPOs, ECM could be the real surprise of 214 by Marcello Conti >> Features 12 Cover story CDP at a crossroads: what's next While private equity players see the public giant as a dangerous business competitor, management tries to reconcile long term returns on investments with procyclical financing by Ettore Mazzotti Maurizio Tamagnini (left) and Giovanni Gorno Tempini >> DEPARTMENTS 6 Event: Global awards Data in this issue are valid through 12 June Debt CM Corporate bonds, a new marketplace The 4% increase in this segment of the debt market in 213 has been followed by a strong activity this year as well by Marcello Conti 7 Who's Who People in the corporate & investment banking teams 18 SWF The Aristocrats open their wallets From China to the Middle East, crossing through Russia, the sentiment of Sovereign Wealth Funds towards is changing by Mariano Mangia Gabriele Vianello (left) and Stefano Fassone C&IB 6 Special AIM for liquidity The most interesting ideas and issues of the Alternative investment market by Pier Paolo Albricci 8 Event: The winners of the tenth edition of the M&A Awards NEXT ISSUE - Nº 157 (October 214) Annual survey: the Italian Financial Elite - special distribution to IMF 3

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4 GLOBAL AWARD 214 EVENT Above: Piero Melazzini, chairman of Banca Popolare di Sondrio, with Paolo Panerai, publisher and editor in chief of Milano Finanza. Right: Carlo Salvatori, chairman of Lazard in, during his recorded speech. This was the twelfth edition of the Milano Finanza Global Awards In the framework of the Global Awards promoted by Milano Finanza, twelve Italian bankers received the awards named after Lombard and the former governor of the Bank of, Guido Carli Lombard-Carli Awards for Top Bankers The twelfth edition of the Milano Finanza Global Awards held on 3 March in the setting of Palazzo Mezzanotte, which houses the Milan Stock Exchange began with an opening speech by Ignazio Visco, Governor of Banca d Italia to the crème de la crème of Italian finance and banking, including the winners of the coveted awards, instituted by Lombard and named after former Governor of Banca d Italia, Guido Carli. Franco Bassanini, President of Cassa Depositi e Prestiti, won the Banker of the Year award. Piero Melazzini, President of Banca Popolare di Sondrio (45 years in the banking wold), won the Bank Lifetime Achievement Award ex-aequo with Giovanni Bazoli, President of the Supervisory Board of Intesa Sanpaolo (4 years in the credit world). Lorenzo Alfieri, JP Morgan Asset Management's country head for, won the Best Asset Management Bank award, while Ferruccio Ferri, Board member of UBS Italia collected the prize for Private Bank of the Year. Filippo Boria, BNP Paribas's head of corporate and investment banking in, won the Best Foreign Corporate Bank in award, Carlo Salvatori, Guido Carli-Lombard Awards Name Position Bank Award Category Franco Bassanini Chairman Cassa Depositi e Prestiti Banker of the year Giovanni Bazoli Chairman Intesa San Paolo Bank Lifetime Achievement (ex equo) Piero Melazzini Chairman Banca Popolare Sondrio Bank Lifetime Achievement (ex equo) Fabrizio Viola Ceo Monte dei Paschi di Siena Retail bank of the year Gianni Zonin, Chairman and MD Banca Popolare di Vicenza Cooperative bank of the year Samuele Sorato Victor Massiah Ceo Ubi Banca Special Award CSR Lorenzo Alfieri Managing director Jp Morgan Europe AM Best asset management bank Ferruccio Ferri Board member UBS Private bank of the year Filippo Boria Head of CIB BNP Paribas Corporate foreign bank of the year Carlo Salvatori Chairman Lazard Italia Merchant banker of the year Flavio Valeri Chief Country Officer Deutsche Bank Best foreign bank Paolo Fiorentino Chief operating officer Unicredit Unicredit Tower project 1) Franco Bassanini, Chairman of Cassa Depositi e Prestiti, Banker of the Year, 2) Fabrizio Viola, CEO of Monte dei Paschi di Siena, Retail bank of the year, 3) Flavio Valeri, CEO of Deutsche Bank, Best Foreign Group in, 4) Piero Melazzini, Chairman of Banca Popolare di Sondrio, Bank Lifetime Achievement Award ex equo with Giovanni Bazoli, chairman of Intesa Sanpaolo, 5) Victor Messiah, CEO of Ubi Banca, Special Award CSR, 6) Lorenzo Alfieri, JP Morgan Europe, Best Asset Management Bank President of Lazard Italia, won the prize for Best Business Banker, and Deutsche Bank, represented by Chief Country Officer of Deutsche Bank, Flavio Valeri, won the Best Foreign Banking Group award. Fabrizio Viola, CEO of Monte dei Paschi di Siena, collected the prize for Retail Bank of the Year, while Gianni Zonin, President of Banca Popolare di Vicenza, won the Best Cooperative Bank award. Franco Bassanini, President of Cassa Depositi e Prestiti talked about creating the conditions to promote growth and presented a proposal with Marcello Messori, signed by the association Milano Finanza-L Italia c è. The aim of this project is to provide a state guarantee for debts of the public administration. The idea is quite simple, and the Renzi Administration seems to be willing to implement it shortly, as he had announced this measure in his program, explained Bassanini. Thanks to the State guarantee, banks will be glad to acquire receivables owed by the public administration from the businesses, because thanks to that guarantee, they do not involve any capital absorption for the banks. Moreover, this will allow banks to improve the credit quality. On the other hand, businesses will have the liquidity required to start being operational and productive again. This will give the economic boost ro recover. 7) Marco Samaja, CEO of Lazard, collects the award for Carlo Salvatori, chairman of the bank 8) Gianni Zonin (right in the middle) and Samuele Sorato, Banca Popolare di Vicenza, Chairman and managing director, 9) Paolo Fiorentino, COO of Unicredit Group, awarded for the Unicredit tower project, 1) Filippo Boria, BNP Paribas, Head of CIB, Corporate foreign bank of the year, 11) Vittorio Meloni, Intesa Sanpaolo head of corporate communication, collects the award for Giovanni Bazoli, 12) Ferruccio Ferri, board member of UBS, Private Bank of the Year

5 1 TenTH Edition A Lombard INITIATIVE Honor to the Winners of the M&A Awards The jury assigned the merits for deals completed in 213 to General Electric, Gnutti Carlo, the Ali Group and Recordati Event 214 Adebate moderated by Roger Abravanel on the privatizations in announced by the government was the focal moment of the ceremony for the delivery of the M&A Awards 214, in its tenth edition. Abravanel, who is the chairman of the jury of the awards (for the list of members see next page), introduced three bigs of investment banking in, Claudio Costamagna, Raffaele Jerusalmi and Maurizio Tamagnini, who were on the forefront of the past privatization season in, in the late Nineties. Costamagna is now chairman of Salini Impregilo, number one of the Italian general contractors, Jerusalmi is the CEO of Borsa Italiana and Tamagnini is at the helm of Fondo Strategico Italiano. Before the debate, followed with interest by more than 2 businessmen, the member of the jury delivered the awards to the entrepreneurs and managers, in representation of the companies, that added their name to the honour list of the awards. The winners of this edition were: Gnutti Carlo, Best Acquisition Abroad by an Italian Company, which stood out for its entrepreneurial courage, impetus towards internationalization and ability to grasp opportunities on new markets (see details next page); General Electric, Best Acquisition in by a Foreign Group, for confidence in the Italian industrial system and the growth opportunities it offers (see details on next page); Ali Group, best Acquisition in by an Italian company, for the ability to obtain synergies, streamline organizations and achieve a critical mass sufficient to withstand international competition (see article next page), Recordati (Finance for Growth) as a serial acquiror (article page 38). M&A Award is an initiative launched by Lombard, KPMG, Fineurop Soditic under the patronage of Bocconi University and the Italian Association of Private Equity and Venture Capital Advisors (AIFI). The 16-member jury selected, among a couple of dozen of operations signed in 213, the most outstanding deals in terms of entrepreneurial courage, growth, vision and industrial innovation. Above, attendance at the ceremony for the delivery of the awards, held in Milan on April 1. From the top, clockwise, Michele Norsa, CEO of Ferragamo, Giuseppe Latorre, head of KPMG advisory, Roger Abravanel and Eugenio Morpurgo, CEO of Fineurop Soditic From left, the winners: Sandro De Poli, Chairman of GE Italia with Matteo Tarditi, CFO of AvioAero; Paolo Groff, CFO of Gnutti Carlo, Luciano Berti, Chairman and CEO of the Ali Group and Giovanni Recordati, Chairman and CEO of Recordati THE JURY Roger Abravanel, chairman, McKinsey emeritus and essayist Gabriele Capolino, Associated Publisher of Milano Finanza Stefano Caselli, Deputy Dean of Bocconi University Alessandro Castellano, CEO of Sace Innocenzo Cipolletta, Chairman of AIFI Massimo D'Aiuto, CEO of Simest Maximilian Peter Fiani, Partner of KPMG Corporate Finance Francesco Gianni, Managing partner Gianni, Origoni, Grippo & Cappelli Law Firm Raffaele Jerusalmi, Managing Director of Borsa Italiana Andrea Merloni, Chairman of Indesit Giuseppe Miroglio, Chairman of Miroglio Group Eugenio Morpurgo, CEO of Fineurop Soditic Franco Moscetti, CEO of Amplifon Michele Norsa, CEO of Ferragamo Angelo Provasoli, Chairman of RCS Mediagroup Margherita Zambon, Chairman of Zambon Group photo Cristiana Casotti 8 9

6 A Lombard INITIATIVE The winners of the tenth edition Fiducia nella forza dell esperienza. Foreign acquirors in ITALIAN acquirors abroad ITALIAN acquirors in Bidder: General Electric Company (through GE Italia Holding) Target: GE Avio S.r.l. (Avio Aviation Business) Sellers: Cinven Ltd, Finmeccanica S.p.A. Sector: Aerospace & Defence Stake: 1% Price: 1.9 bn (equity value) Closing date: August 1st Bidder rationale: to increase expertise in the areas of mechanical transmission systems, low-pressure turbines, combustion technology, and automation systems. Seller rationale: exit strategy On August 1st, 213 General Electric completed the acquisition of the aviation business of Avio, a leading, -based provider of civil and military Sandro De Poli aviation components and systems, for a total consideration of 1,9 bn, or about 5x the 213 Ebita ( 376 mn) on 2.3 bn revenues. Avio s aviation business, which was renamed, after the transaction, Avio Aero, will retain headquarters in Turin. Avio Aero operates in four continents and enhances our global capabilities and engineering strength as our production rates rise," said David Joyce, president and CEO of GE Aviation. Also GE will build Avio Aero's position as a supplier to other industrial and aviation companies. We are thrilled to further our industrial participation in ". The deal was enhanced by the strong investment policy Avio followed in the last three years under the guidance of the CEO Francesco Caio, who injected some 45 mn to upgrade added value in the core business (transmission) of the company. Bidder: Gnutti Carlo Target: WH Industries, Inc. Sellers: na Sector: Automotive Stake: 1% Price: 22 mn (equity value) Closing date: January 11 Bidder rationale: strengthen the position on the international market, along with a vertical integration of production. Seller rationale: consolidation The Brescia based group specialized in precision engine components, acquired 1% of WH Industries, the American company that manufactures automotive parts, achieved a turnover of 27 mn in 213, for 22 mn. WH Industries has clinched a major order of Daimler Group for diesel engine rockers for commercial vehicles worth 1 mn a year from 213 with possible extension to 218. This operation will allow Carlo Gnutti to expand its production to an area that is still favorable for the target market, as well as its client portfolio both in the US and in Europe. With the acquisition of the foundry specialised in ductile iron castings, once a division of Paolo Groff WH Industries, Gnutti takes an important step in the verticalization of the production chain, thereby meeting part of the demand for alloy castings, normally used in the production cycle, in-house. The Group has a consolidated presence in, Sweden, the United Kingdom, Canada, and India. 95% of the group s revenues comes from export, especially to Northern Europe and the USA, where clients include John Deere and Caterpillar. Bidder: Ali Group Target: Rancilio Group Sellers: Rancilio family (69%) and Alto Partners (31%) Sector: Industrial equipment Stake: 1% Price: na Closing date: September 3 Bidder rationale: take leadership in the core business Seller rationale: exit strategy Ali Group consolidated its position in the food service equipment market by acquiring 1% of Rancilio, the company that manufactures professional coffee makers controlled by the Rancilio Luciano Berti family (69%) and by Alto Partners private equity fund (31%). The Ali Group and Rancilio have entered into an agreement according to which the management of the latter will cooperate actively within the new group. In 213, the Ali Group achieved a turnover of 1.5 bn and an EBITDA of 234 mn. Rancilio and its Swiss subsidiary, Egro, which in 213 achieved a 54 mn turnover and a 9 mn EBITDA, are among the world s leading manufacturers of both traditional and fully automatic coffee makers. This acquisition adds another dimension and another business segment to our brand portfolio, said Luciano Berti, President and CEO of the Ali Group. Berti has confirmed Giorgio Rancilio at the helm of the brand launched by his family back in In December 212, the Ali Group had scored a major achievement in the United States by investing $ 575 mn for the acquisition of Scotsman Industries, the world's leading ice machine manufacturer. Ricco di saggezza ed esperienza, l elefante avanza a passo sicuro ed equilibrato. Investimenti intelligenti ed un know-how di lunga data costituiscono l essenza dei fondi dedicati alla gestione del patrimonio. Questo è ciò che caratterizza la storia di successo dell Ethna-GLOBAL Defensiv, Ethna-AKTIV E ed Ethna-GLOBAL Dynamisch. Per un investimento equilibrato: 1 Per informazioni dettagliate sulle opportunità e i rischi, generali e specifici, di un investimento nei fondi si rimanda al prospetto e al KIID (informazioni chiave per gli investitori) nella versione di volta in volta vigente disponibili gratuitamente, unitamente al L regolamento O M di gestione B A e alla R relazione D annuale e semestrale di ciascun fondo, sul sito internet 11 della Società di Gestione ETHENEA Independent Investors S.A., Prima dell adesione leggere il prospetto.

7 COVER STORY CDP at the crossr oads: what's next? While private equity players see the public giant as a dangerous business competitor, management tries to reconcile long term returns on investments with procyclical financing. By now performance is good, but the strategy involves increasing risk It's perhaps the only Italian bank that is hiring instead of shedding jobs, that rather than offloading assets is actually aiming to increase them, that has big projects in the realestate sector, avoided by the majority of banking industry players, and that has a portfolio containing almost no watch-listed receivables. In addition, it's among the world's top financial institutions in terms of cost-income ratio, with a figure of just 2.4%: it's clearly an unusual bank, but precisely because of its genetic characteristics and cash resources, which touched the 148 bn mark at the end of 213, it's becoming an increasingly influential player in the financial arena, the first equity investors on the scene, which in 213 financed the economy with 28 bn (+22% y/y) and a mastermind of the governement privatization program. Cassa Depositi e Prestiti (CDP), the creative Italian version of the German KfW, the French Caisse de depot and, in some respects, also the European investment bank (BEI), has taken a little from each of them, but stands apart from them all thanks to its visionary interpretation of the role of trend-bucking operator in the economy, its starting DNA. This, at least, since it was renamed in 23 after 15 years spent entirely at the service of the State. In that year, with a decree of the government then by Ettore Mazzotti "Injecting liquidity into the banking industry for up to 1 years comes close to replacing capital market access for SMEs, providing them with a situation of stability for at least a couple of cycles" headed by Silvio Berlusconi, together with Giulio Tremonti, the Economy Minister, the real strategist behind the transformation, the ex-treasury agency and post office savings operator, became a joint stock company thanks to the injection of 3% of the capital of private entities in the form of banking foundations. The goal of Giovanni Gorno Tempini, CEO of CDP since 21, and his teammate at Fondo Strategico, Maurizio Tamagnini (left). Both came from investment banking:gorno served for a long time at JP Morgan and Tamagnini at Merrill Lynch STRUCTURE LISTED COMPANIES (CDP SHARE; BOOK VALUE) ENI Spa (25.76%; 15.3 bn) Terna Spa (29.9%; 1.3 bn) Snam Spa - via CDP RETI (3%; 3.5 bn) UNLISTED COMPANIES (CDP SHARE) TAG - via CDP GAS (89%) FINTECNA (1%) SACE (1%) SIMEST (76%) foreign jv SHANGAI ELECTRIC FINCANTIERI (99.4%) The chart summarizes the spiderweb of CDP s direct and indirect activities: as a holding company for stakes in listed and unlisted companies (blue) on the one hand and its activity as an indirect investor through specialized funds (red), of which the main fund is FSI, on the other. Qatar INVestments KUWAIT INVestement AUTHORITY RUSSIA DIRECT INVESTment FUND The cdp network in the industrial economy 4% 4 mn 5% 1 Bn Fondo Strategico Italiano (FSI) 4.4 bn IQ Made in Investment Company 2% 5 mn 5% 5 mn PRIVATE EQUITY (CDP COMMITMENT) FII - Fondo Italiano d'investimento ( 25 mn) F2i - Fondo Italiano per le Infrastrutture Fund I ( 151 mn) and Fund II ( 1 mn) Marguerite Fund ( 1 mn) InfraMed Fund ( 15 mn) Fondo Investimenti per l'abitare ( 1 bn) Fondo Investimenti per la Valorizzazione ( 825 mn) European Energy Efficiency Fund ( 6 mn) JV FSI KIA FSI + RDIF 884 mn 84 mn 24 mn 151 mn 15 mn 2 mn 3 mn 7 mn 8% 5% 5 mn the corporate make-over process was to distinguish its accounts from those of the State, as required by European regulators, and hence to ensure the complete separation of public accounts from the accounts of the revamped institution. This was a ruse, as reported by many at the time, but a ruse that had illustrious precedents in other countries and an unobjectionable quality of legality. Plied with 3.5 bn of capital, a good measure of major shareholdings in Enel, Eni and Poste Italiane, on behalf of which CDP once managed savings deposits, and a current account of 1.8 bn held with the State treasury department. CDP, the two-headed giant with a large proportion of public participation and low level of private capital, was thus launched in the financial arena like an elephant in the drawing room. Indeed, the first three-year plan was placed in the hands of a management that although neutral, was careful not to make enemies and attentive to the fundamentals of its business: the collection and management of post office savings on behalf of the public administration. However, the accounts for 31 December 27, with the financial recession by then in full swing, showed a result that was anything but negligible: total assets had doubled to reach 196 bn, post office deposits were up by 6%, but cash resources especially, which were at the record level of 93 bn compared to the 39 bn at the outset. Also the income statement looked good, with a stable brokerage margin a sort of EBITDA of operations remaining at around 2.5 bn. The initial shareholders' equity of 3.5 bn ended up being in excess of 14 bn. With transaction multiples of this nature the outlook might look rosy, if not actually brilliant, except that all hell broke loose outside the mock imperial style building in via Goito in Rome, bringing the economies of half the world's coun

8 tries to their knees. From the halls of power in Rome people started looking at the new CDP with a keener interest in its cash reserves, in a country perennially suffocated by the weight of its debt. The first to act was Giulio Tremonti, who had returned in May 28 to head the Ministry of the economy, after a short interval at the opposition of a center-left government. It was Tremonti who, the following November immediately on the heels of the Lehmann Brothers scandal, appointed the new president, Franco Bassanini, from the other side of the chamber to that of Tremonti's coalition, but anyway deserving of respect for his reform of the public administrations and a long parliamentary career and services rendered in the ranks of various governments. The combined provision of a new high-profile decision-maker president, a minister who was set on making the instrument work to help the economy find its feet, and a financial crisis that was pressing down ever harder on the manufacturing economy, led CDP to take on diverse and more active roles in its areas of intervention. The roles in question are essentially three in number: funding of local authorities and the public administration, the development of Italian infrastructure by attracting institutional and private investors, and the role of strategic investor in the debt and equity markets, especially (but not exclusively) for the SME sector. If therefore since 29 almost nothing had changed in the bylaws and implementation plans compared to the initial configuration of 23, in actual fact a seachange had already occurred. Not only because the list of CDP's major investments had doubled in just a few years, extending to reach strategic sectors such as energy and energy distribution, through Terna, Eni, Enel, Snam and Cdp Reti, and shipbuilding (Fincantieri). It was the entry into private equity in 21 through the 25 mn invested in Fondo d'investimento Italiano, a vehicle created to help the growth of SMEs, and large scale strategic investments TREND Long distance performance: net worth exploit 11 Total assets Net profit Cash Net worth The chart, on a scale of 1, covers the period up to 24 and therefore the fiscal year 23, the first one after the CDP transformation into a joint stock company. It shows growth in all the main aggregates. Net worth, in particular increased ten-fold, thanks to fairly stable management results, even during the financial crisis of the last years. The trade-off between a growing stock of postal savings accounts and the investment of great liquidity has so far kept margins stable CDP Financial Highlights: 1-year breakdown bn Intermediation margin Net profit Net Worth Total asssets Postal savings Cash Roe (%) Source: company reports data 14 15

9 COVER STORY sector that irked the most strident advocates of trade liberalism, which finds one of its most ardent supporters in Roger Abravanel, a former long-term McKinsey top-gun, who became a writer and opinion leader with a large following and plenty to say on the problems that are stifling economic growth in. Abravanel expressed his fear that CDP, because of its immense cash reserves, might become a kind of financial shock absorber able to compensate for various cases of industrial mismanagement, effectively a fledgling IRI, the institute for industrial reconstruction, which oversaw post WWII economic development in and was permanently put out to pasture at the start of the 2s. But is it a real risk? Few people believe so, even those in the investment banking and in the think tanks that form around the centre of economic thinking, the economics faculties of Bocconi University in Milan, Ca'Foscari in Venice, and Luiss in Rome. The 28 watershed caused many to review their ideas about the role of the visible hand of the State in the economy in pre-financial crash situations or anyway during times of major financial crisis. And in the eyes of the continental European market, where interventionism in the French and German economies, which can hardly be claimed to spring from a socialist-inspired tradition, is an accepted reality that is frequently even praised in its more market oriented aspects. Like a Sovereign Fund? Despite this background, the fact that CDP has the aura of a sovereign fund and cash resources in line with the regal title is troubling to those who are less willing to hand over areas of intervention in the real economy to the care of the State. Of course as long as we're speaking about debt, few voices are raised and no one seems particularly bothered, especially not the banks, forever struggling to cope with the credit crunch. Quite the opposite. And debt, for CDP, remains one of the bank's main assets, and not only the debt held by the public administration. In the past three years 85 thousand SMEs have been financed with an average capital injection approaching 16 th, by means of a strange mechanism whereby CDP takes out credit lines with the high-street banks whose job it is to supply cash resources to companies on the basis of their credit rating. This means that the business risk remains with the financing bank and CDP is subject only to banking risk, which is much lower. The fact however remains that the generous credit lines, 18 bn allocated from 21 to 213 distributed in the amount of 5%, could be used as Treasury instruments by the financing banks, rather than benefiting the real economy. Banks have to report to CDP every six months on how they made credits to SMEs with these funds. "We're looking for increasingly stringent reporting from the banks in relation to the times and methods of use of our credit ceiling," assured Giovanni Gorno Tempini, CEO of CDP since 21, who, in contrast, highlights an important characteristic of this type of receivables: their ten year duration. Injecting liquidity into the banking industry for up to 1 years comes close to replacing capital market access for SMEs, providing them with a situation of stability for at least a couple of production cycles," pointed out Gorno Tempini, offering a counter position to those who claim that the stock exchange is the market highway that must be taken also by small industrial players. And this is all the more true since, with the beginning of this year, the target size of financeable companies, with a new plafond of 2 bn, has increased, shifting towards medium-sized enterprises (above 25 employees), "because we realized that we were lacking the category of companies that also play a highly important role in the industrial system", explained Gorno Tempini. It is too early to say how and how much this phenomenon is spreading and replacing conventional bank lending, because things are moving very quickly in financial terms. Since January, alongside traditional real estate activities, CDP has become a buyer on the market of asset backed securities (ABS), packages of mortgages held in high-street bank portfolios. The commitment is for 3 bn within 215, 73 mn of which have been already acquired in the last months. It's a qualitative leap for CDP, which thus assumes the final risk if the credit instrument is not honored, as we were reminded by the events of 28 and thereafter. However, Gorno Tempini is ready to set the limits. We evaluate the package of mortgages contained in the ABS, then we do the choosing," underlined the CDP CEO. Who, more than risks, looks at the economic stimulus that claims that the operation will serve. Purchasing ABS from the banks serves to offload part of their capital intensive books, freeing up capital and allowing new credits to the bank clients. From the view of the economic cycle, it's a significant move," concluded Gorno. Critics to the equity strategy The highest level of perplexity, currently only expressed in an undertone, from the side of critics is reserved for CDP's equity assets. From an economically orthodox standpoint, the intervention of a public-private operator such as CDP should be restricted to sectors suffering from a clear equity gap that are therefore in need of a strategic driver to overcome it", said Fabio Sattin, with his twenty-year-plus experience in private equity and as a senior fellow of finance at the Bocconi and Ca' Foscari universities. The most evident example in is that of the tourism sector, one of the economies under-exploited and a possible locomotive to drive recovery. But the locomotive never managed to get up steam because of a structural weakness of the fragmented operators in the industry, especially in the hospitality sector, and a lack of fitting development projects for the standing of a country that is the depositary of artworks and natural treasures porate a hotels management company, together with private operators in the various 3, 4, and 5-star market segments, which leases and develops professional services of the facilities owned by property companies in accordance with a model of division between ownership and management. The CDP's scheme is to also put its real estate division in the field. The division holds, through Fondo Investimenti, a growing number of public buildings, especially disused barracks and hospitals, frequently situated in touristic locations or in European peers bn Total assets Operating profit Net profit Equity Lending volume Cdp Kfw (Ger) Cdc (Fr) 143 na na Source: corporate reports Franco Bassasini has been the Chairman of CDP since 29. Former Italian Cabinet Minister for Public Administration and Regional Affairs ( ) he is a professor of Constitutional Law at the First University of Rome. He chairs the Astrid Foundation, an Italian think tank established in 21, that gathers together about 35 scientists. On the left, Marco Sangiorgi, head of CDP Investimenti, the key manager of the real estate activity that can be rivalled by precious few other places in the world, explain the analysts. That's why CDP announced an ambitious industry project in December that will create an Italian tourism pole, through its equity arm, the Fondo Strategico Italiano. Under the active guidance of Maurizio Tamagnini, ex Merrill Lynch banker who joined Gorno's team in 211, the FSI is preparing the ground to incorcity centers, that can be converted (and financially exploited) as hospitality structures for various levels of tourism. An initial attempt is being made in Venice, where the ex-mare al Lido hospital, which has entered CDP's investment fund, may become a part of the coastal resort development plan in which the Hines group headed by Manfredi Catelli is the pivotal industrial operator. Thus offering an excellent private guarantee for the success of a long term operation that is still in the preparatory stage. A powerfull investor But the question many are asking is what other areas are likely to be subjected to the firepower of Fondo Strategico, which, with its capital of 4.4 bn (and 3 bn more committed), is one of 's primary equity investors. It currently has 2.6 bn invested in 8 companies. Where will it be used, and, more importantly, how will it be used? The mission implicit in the name of the Fund is to develop sectors of strategic importance for the economy, a vague definition, according to critics, that acquisitions such as that of a valves manufacturer like Valvitalia, despite being a leader in global oil & gas supplies, or of another world-leader like Kedrion, operating in the biopharma sector (hematic treatments), do little to clarify. These investments therefore look rather like an invasion of the private sphere by a predominantly public operator with a social mission. Social, or simply the drive to generate profit? We try to play our part as facilitators of access to credit and equity investors in a way that complies fully with market regulations, because this means we're not distorting a mechanism we consider to be correct, but also because if we acted differently we would lay ourselves open to the claim that we are providing government assistance," explains Gorno Tempini in defence. Tempini's long experience in the private sector with JP Morgan for more than 1 years and thereafter at the helm of Mittel, Caboto and finally Intesa SanPaolo as CFO before coming to Rome, is, in the eyes of many, a solid guarantee against the emergence of conventional public operator type logic. And the best guarantee is perhaps his guardian angel, Giovanni Bazoli, president of the Intesa supervisory board, one of the architraves maintaining equilibrium in the financial system. Gorno and Tamagnini's supporting arguments are pretty sound: continued on page

10 Sovereign FUNDs The Aristocrats open their wallets The Top 1 Sovereign Wealth Funds and their chief executives by Mariano Mangia From China to the Middle East, crossing through Russia, the sentiment of Sovereign Wealth Funds towards is changing, even if the gap with Spain and France, over all, is still wide. But price and returns in real estate, manufacturing and blue chips are on the competitive edge. Thus... The signal was clear when People s Bank of China has acquired in March a 2.71% stake in Enel and a 2.12% stake in Eni, thus underlining the growth in Italian investments by the funds: the choice of Zhou Xiaochuan, governor of the Bank of China, to invest just above 2%, forced the Chinese to make their move public, and therefore politically relevant, while up to 1.99% it could have remained con- fidential. Even though the Bank of China does not exactly belong to the SWF category, the move came as a confirmation of large global equity investors interest in. According to researchers from the Sovereign Investment Lab at Bocconi University, the pace of investment in by SWFs is rising. In 21, the total amount invested reached $2.6 bn and picked up again after the debt crisis in 211. The focus has mainly been on real estate and it culminated last year in an investment of over $1 bn by Qatar Holding in the Porta Nuova project. By acquiring a 4% stake in the initiative managed by Hines Italia, QH has broken new ground in the real estate sector, because it is the first time a sovereign wealth fund has invested in a development project rather than buying prestigious existing properties. Porta Nuova is one of the biggest urban renewal projects in Europe, covering more than 29, m² altogether and encompassing office buildings, retail units, hotels and an exhibition center. It is a concrete example of a high-quality project conceived to support the national economy and attract investments from and abroad, Lombard was told by Manfredi Catella, the Vladimir Putin and Enrico Letta, the past Italian premier, at the signing of the jv between the Direct Russsian Investment Fund and Fondo Strategico Italiano. Above, Zhou Xiaochuan, governor of the Bank of China, with Christine Lagarde, CEO of IMF Yngve Slyngstad CEO Norges Bank Investment Management Government pension fund Norway Asset ($ bn) at apr-14: 838 Asset ($ bn) at apr-13: 84 Trasparency index: 1 Bader Mohammad Al-Sa'ad Chairman and CEO Kuwait Inv. Authority KUWAIT INVestment AUTHORITY Kuwait Asset ($ bn) at apr-14: 41 Asset ($ bn) at apr-13: 386 Trasparency index: 6 Source. SWF Foundation and the top investors in Parent Entity Name Inv. $ mn Deals Qatar Investment Authority (QIA) 2,41. 6 IPIC (Abu Dhabi) 2, Libyan Investment Authority (LIA) GIC (Singapore) Brunei Investment Agency (BIA) Mubadala Development Company ADIA (Abu Dhabi) Total 6, Source: Sovereign Investment Lab, Università Bocconi Sheikh Hamed bin Zayed Al Nahyan Managing Director Abu Dhabi Investment Authority (ADIA) Abu Dhabi Invest. Authority UAE Asset ($ bn) at apr-14: 773 Asset ($ bn) at apr-13: 627 Trasparency index: 5 Norman T.L. Chan CEO Hong Kong Monetary Authority HK Monetary AUthority IP China Asset ($ bn) at apr-14: 327 Asset ($ bn) at apr-13: 327 Trasparency index: 8 Fahad-Al-Mubarak Governor Saudi Arabia Monetary Authority (SAMA) SAMA Foreign Holding Saudi Arabia Asset ($ bn) at apr-14: 676 Asset ($ bn) at apr-13: 676 Trasparency index: 4 Lim Siong Guan Group President GIC Private Limited GIC Singapore Asset ($ bn) at apr-14: 32 Asset ($ bn) at apr-13: 285 Trasparency index: 6 Gao Xiqing Vice Chairman and President China Investment Corporation CHINA INV CORPORATION (CIC) China Asset ($ bn) at apr-14: 575 Asset ($ bn) at apr-13: 575 Trasparency index: 7 Ho Ching Executive Director and Chief Executive Officer Temasek Holdings Temasek Holding Singapore Asset ($ bn) at apr-14: 173 Asset ($ bn) at apr-13: 173 Trasparency index: 1 Yi Gang Director State Administration of Foreign Exchange, China SAFE INVestment COMPANY China Asset ($ bn) at apr-14: 568 Asset ($ bn) at apr-13: 568 Trasparency index: 4 Ahmad Al-Sayed CEO Qatar Investment Authority QATAR INVestment authority Qatar Asset ($ bn) at apr-14: 17 Asset ($ bn) at apr-13: 115 Trasparency index: 5 Hines Country Head for and the CEO of Hines Italia. The deal with the sovereign wealth fund from Qatar has boosted s credibility as a developer of strategic projects on a par with those in other leading international capitals. It has helped to remove some of the obstacles that have always discouraged international investors from getting involved in renewal and development initiatives. The investment highlights two im

11 Sovereign FUNDs A breakdown of their Italian investments Sovereign Wealth Fund Target Sector Year Amt $ mn Stake % International Petroleum Investment Company (IPIC) UniCredit Banking 21 2, Qatar Investment Authority (QIA) Porta Nuova Real Estate 213 1,52. 4 Qatar Investment Authority (QIA) Smeralda Holding Real Estate Libyan Investment Authority (LIA) UniCredit Banking Brunei Investment Agency (BIA) Hotel Principe Di Savoia Hospitality Government Investment Corporation (GIC) Singapore Roma Est Shopping Centre Real Estate Libyan Investment Authority (LIA) Unicredit Banking Libyan Investment Authority (LIA) JV Fund with Mediobanca Banking Abu Dhabi Investment Authority (ADIA) Mediaset Communications Qatar Investment Authority (QIA) Four Seasons Firenze Real Estate Qatar Investment Authority (QIA) IQ Made in Venture Consumer Goods Brunei Investment Agency (BIA) Hotel Eden Hospitality Qatar Investment Authority (QIA) The Excelsior Hotel Gallia Hospitality Mubadala Development Company PJSC Ferrari SpA Automotive Government Investment Corporation (GIC) Singapore Omicron Plus Fondo Imm. Real Estate Libyan Investment Authority (LIA) Fiat Automotive Mubadala Development Company PJSC Piaggio Aero Industries Automotive Libyan Investment Authority (LIA) ENI Oil & Gas International Petroleum Investment Company (IPIC) UniCredit Banking Qatar Investment Authority (QIA) Grand Hotel Baglioni, Florence Real Estate Libyan Investment Authority (LIA) Tamoil Italia Oil & Gas Government of Singapore Investment Corporation (GIC) Fondo Cloe Real Estate Libyan Investment Authority (LIA) Juventus FC Personal Services Mubadala Development Company PJSC IAM Rinaldo Piaggio SpA Automotive Libyan Investment Authority (LIA) Juventus FC Recreation Government of Singapore Investment Corporation (GIC) Snai Recreation Libyan Investment Authority (LIA) Olcese Apparel Libyan Investment Authority (LIA) Telecom Italia Communications Government Investment Corporation (GIC) Singapore Tod's Apparel Government Investment Corporation (GIC) Singapore Fiat industrial Automotive International Petroleum Investment Company (IPIC) UniCredit Banking Libyan Investment Authority (LIA) Fin.Part Apparel Libyan Investment Authority (LIA) Juventus FC Recreation Libyan Investment Authority (LIA) Olcese SpA Apparel Libyan Investment Authority (LIA) Unicredit Banking Libyan Investment Authority (LIA) Finnemeccanica Industrial equipment Mubadala Development Company PJSC Piaggio Aero Industries Aircraft Libyan Investment Authority (LIA) Capitalia Banking 22-3 Mubadala Development Company PJSC JV with Poltrona Frau Group Personal Services Brunei Investment Agency (BIA) Seven Hills Hotel Hospitality *Estimate Value. Total investment of 2 BN. Qatar will have a stake of 4% in the project. Source: Sovereign Investment Lab, Università Bocconi portant changes in the sector: greater involvement by SWFs in the field of real estate and a new approach to investing. The opportunistic funds looking to buy big assets at cheap prices have been joined by significant institutional investors such as sovereign wealth funds with medium to long-term strategies that are able to take an industrial and economic development approach to real estate investments, explained Catella. Anyway real estate is the second biggest area of investment by SWFs in, accounting for 36% of all investments, according to Bocconi data. This figure increases to 45% if investments in luxury hotels are included. Until last year, SWFs mainly seemed to devote their attention to trophy assets like Smeralda Holding, which was bought by Qatar Holding for $789 mn in 212 and owns various properties in the Costa Smeralda area: four luxury hotels, a marina, a golf course and a 51% stake in 2,29 hectares of land. In 213, the same fund gave the Fratini family 15 mn for the Four Seasons Hotel in Florence, which is located in the Palazzo della Gherardesca, a masterpiece of Renaissance architecture. The Qatar Investment Authority (QIA), another sovereign wealth fund from the emirate, bought the Excelsior Hotel Gallia in Milan for $ mn in 26 and the Grand Hotel Baglioni in Florence for an estimated $38.57 mn in 212. Dorchester Collection is a luxury hotel operator owned by the Brunei Investment Agency (BIA), an arm of the Ministry of Finance of Brunei. In 23, it spent $3 mn on the five-star Hotel Principe di Savoia in Milan and in September 213 it bought the Hotel Eden in Rome for an estimated $147 mn. According to market rumors, interest from the Abu Dhabi Investment Authority is behind the offer that Hines SGR has made for the former UniCredit headquarters on Piazza Cordusio in Milan. The property is owned by IDeA FIMIT s Omicron Plus real estate fund, a 3% stake in which was bought in 29 by the Government Investment Corporation (GIC) of Singapore. In the current conditions, great appeal is held by investments in what sovereign wealth funds call trophy assets, which have seen a relative drop in prices and offer returns of 1% to 3%. They are especially attractive for funds making long-term investments, stated Franco Masera, a senior advisor at KPMG. The real estate sector has a strategic part to play in the economic development of the country. Land and property are some of s main resources. Responsible, meticulous public and private initiatives can help re-establish the appeal and credibility of the country, emphasized Catella. the appeal of equity Nonetheless, the majority of Italian investments by SWFs are in equity. Over the years, investments of almost $3 bn have been made in the financial sector alone. Most of this ($2.3 bn) was spent on a 5% stake in UniCredit in 21 by the International Petroleum Investment Company (IPIC) of Abu Dhabi through Aabar Investments PJSC, which had already bought small numbers of shares in the banking group in the past. The Libyan Investment Authority (LIA) has also bought shares in UniCredit. Outside the financial sector, SWFs tend to show interest in big companies. Over the years, Fiat, Finmeccanica and Eni have all entered the portfolios of the Libyan Arab Foreign Investment Company (LAFICO) and the Libyan Investment Authority (LIA), while the Abu Dhabi Investment Authority (ADIA) has acquired a stake in Mediaset. In a particularly noteworthy case, Norges Bank (the central bank of Norway) has invested in 129 listed companies, worth $9 bn in the Italian market, according to data providers Capital IQ, and is a top-5 shareholder in a number of iconic businesses such as Fiat, Eni, Unicredit and Enel amongst others. It recently increased its stake in Banco Popolare to 2.35%. The Abu Dhabi government s Mubadala Development Company invested $136.8 mn in Ferrari and early this year it completed the acquisition of 9% of Piaggio Aero Industries, in which it had already invested $99.4 mn for an 8% stake inm 26. The biggest operation involving unlisted companies was the acquisition by the Government of Singapore Investment Corporation (GIC) of 17.68% of Sintonia, the Benetton family s infrastructure sector holding company. Through Atlantia, Sintonia controls two of the biggest infrastructure companies in : Autostrade per l Italia (toll roads) and Aeroporti di Roma. GIC spent an estimated 1.5 bn to 1.7 bn on stock and a capital increase in 28. Acquisitions of companies by SWFs can have interesting effects on the performance of their shares according to research being carried out by Bernardo Bortolotti, head of the Bocconi Laboratory on SWF, together with Veljko Fotak of the University at Buffalo and William L. Megginson of the University of Oklahoma. They have studied a sample group of 8 operations and analyzed the effects in the very short term examining what happens to the price of shares of acquired companies at the time when details of the transaction are released and the longer term performances. To date, on the day of acquisition, the average variation between the opening and closing prices is.89%. In a control group of similar operations involving similar but private operators, the variation was a significantly higher 2.5%, We have managed to find what I would call unequivocal evidence of a reduction, said Bortolotti to Lombard. According to the research, there are two possible explanations for this behavior. The first is the passive approach to governance that sovereign wealth funds tend to adopt. For example, they do not normally have representatives on the board, for a number Bernardo Bortolotti, head of the Sovereign Investment Lab at Bocconi University, Milan Investments by year Source: Sovereign Investment Lab, Università Bocconi... and by sector 2.74% 2% 3.21% 5.27% 8.43% $ mn 36.27% 41.96% Banking, Insurance, Trading Real Estate Restaurants, Hotels, Motels Aircraft, Autos, Ships & Trains Communications Consumer Goods Other Source: Sovereign Investment Lab, Università Bocconi of reasons which range from a lack of staff and time to most significantly the possibility of negative reactions from the local markets. The second explanation is that there is a form of political impact which affects the market s perception of the investors. When operators of this kind acquire stakes in companies, the market takes into account the perceived political risk. The second hypothesis seems to have 2 21

12 Sovereign FUNDs Fabio Sattin, founder and chairman of Private equity partners more solid empirical foundations. Over the course of three years, the relevant market indices outstripped the sample group by approximately 1% in their performances, although it should be noted that the majority of the investments made in the past were in the financial sector, which subsequently plummeted and seriously affected the portfolios of sovereign wealth funds. Now the SWFs are diversifying much more, reducing the size of their operations in order to limit their impact on the market and gradually altering their governance profiles, stated Bortolotti. Creating partnerships Some of the investments by SWFs are made through private equity funds and one Italian fund in particular has chosen to work solely with foreign investors, including the World Bank and the sovereign wealth funds of Abu Dhabi and Singapore. Founded and controlled by Fabio Sattin and Giovanni Campolo, Private Equity Partners (PEP) has been in operation for more than 2 years. SWFs Who s who The key- managers Where the Italians play the match Although still only plays a small part in the portfolios of sovereign wealth funds, there are some Italians among the key managers that assess proposed investments by these powerful vehicles. Maurizio La Noce, 25 years of experience in the energy industry, is the Ceo of Mubadala Petroleum, with responsibility for developing and managing Mubadala s portfolio of oil&gas-related businesses at all stages of the upstream value chain. A Bocconi University alumnus and former managing director of Bank of America Merrill Lynch, Ugo Arzani was made the head of consumer and retail investments by Qatar Holding, the direct investment arm of the Qatar Investment Authority (QIA). Fabio Scacciavillani, after an experience at the IMF, the European Central Bank and Goldman Sachs in London, moved to the Arabian Peninsula and served in a number of roles before becoming the Chief Economist of the Oman Investment Fund. Together with Massimiliano Castelli, he wrote a book entitled The New Economics of Sovereign Wealth Funds, which was published by Wiley. Despite his origins, Scacciavillani does not invest in. The biggest problems are the taxes, the bureaucracy and the economic situation, he explained. It might seem like there are a few small signs of a recovery, but the fact of the matter is that there is a lack of clarity about taxes, the implementation of legislation, the job market and the political situation. I think that the people who show a reasonable amount of interest in investing in are those with more speculative strategies and outlooks. Bridging the gap Despite the increase in investments in recent years, there is still a big gap between and other countries when it comes to operations by SWFs. According to the Bocconi research center, equity investments by SWFs in amount to almost 5.4 bn, whereas the figure is 19.5 bn for Germany, around 2 bn for France and 15 bn for Spain. The biggest problems in are the taxes, the bureaucracy and the economic situation, summed up Fabio Scacciavillani, the Chief Economist of the Oman Investment Fund. But also leaving aside the obstacles to foreign investment that are common to all investors, such as buare some of our most significant contributors, said Fabio Sattin. It is great dealing with them. They have huge expertise, they are very professional and their investment criteria are perfectly in line with international standards. Investments with PEP tend to involve tens of millions of euros. Very different amounts have been poured into the joint ventures started by the Fondo Strategico Italiano (FSI) with Qatar Holding LLC (QH) and the Russian Direct Investment Fund (RDIF). With the Qataris, it started a joint venture called IQ to invest in companies Fabio Scacciavillani, chief economist at the Oman Investment Fund and (left) Maurizio La Noce, ceo of Mubadala Petroleum from prominent Italian sectors such as manufacturing, fashion, furnishings, design, food and tourism. The 5-5 joint venture was capitalized at a maximum of 2 bn. Meanwhile, the investment platform put together with the Russians was capitalized at a maximum of 1 bn. In February, the FSI sealed a deal with the Kuwait Investment Authority (KIA), which will invest 5 mn in a special purpose vehicle. Long-term investments will be made in both minority and majority stakes, mainly in key industrial sectors for the two economies, explained Sean Glodek, the managing director of RDIF. He is part of the investment committee for the fund, which has been given $1 bn by the Russian government via Vnesheconombank to make strategic investments for Russian industry. The joint venture with FSI Who s who The investment banker SWFs prefer to stay top of the table It should be noted that SWFs' individual approach to investment varies, with some funds making investments through external asset managers, such as ADIA, and others expressing a preference fpr making more strategic, direct investments in individual companies and assets, such as Qatar Holding, or Temasek from Singapore, explained Massimiliano Ruggieri, head of Morgan Stanley Investment Banking in, an experienced banker in the intermediation between SWFs and companies. According to the banker, many funds have a strong preference for partnerships in their investments and the jv of Qatar Holdings with Fondo Strategico Italiano (FSI) is an example. In your opinion, which sectors are more attractive for these kind of investors? Most SWFs invest for purely financial reasons, and will examine individual opportunities on a case by case basis rather than on a top down perspective, said Ruggieri. However, when funds choose a more direct investment, it tends to be in sectors and companies where they perceive a competitive advantage. For example, Qatar Holding has announced a focus on Made in, concentrating on food & food distribution, fashion & luxury, furniture & design, tourism, lifestyle and leisure. Equally, given that SWFs have typically focussed on the largest and most prominent companies in any market, we expect to see future investments continue in firms at the top of the table. Specifically, investments Massimiliano Ruggieri, head of Morgan Stanley Investment Banking in mainly involves renewable energy, food processing, services and financing for heavy equipment. We have a great relationship with FSI, underlined Glodek, who is currently examining a large number of dossiers and hopes to conclude at least two operations in 214. The areas for which is very popular are lifestyle and the famous three Fs: food, furniture and fashion. In addition, we could perhaps add banking and finance, said Fabio Sattin. The founder of PEP also sees a role for SWFs in tourism, which he views as an untapped gold mine in. Tourism is deemed the number one sector to consolidate and relaunch in the government s economic policy and SWFs could be valuable partners in this process, explained Sattin. All of the medium and big brands in are very interesting, in 's financial services giants, such as Aabar's investment in Unicredit, as well as its leading oil and gas, manufacturing, and industrials sectors. Again, many of these companies have already direct or indirect holdings from some of the world's largest sovereign investors. as long as they have an international profile, explained Franco Masera senior advisor at KPMG. Franco Masera, senior advisor at KPMG reaucracy, regulatory and political risks, the company size is one of the specific barriers that hold back sovereigns funds with an interest in, pointed out Bortolotti. Many Italian companies and projects slip under the radar of the sovereign wealth funds. So visibility is one thing holding back big institutional investors, but Bortolotti believes that it is also necessary to pick out investment vehicles and formulae other than the usual joint ventures, which do not work and perhaps promote a change in public opinion and the views of the media. To be honest, I can t see any problems, only an outstanding opportunity to have stable, prominent partners for our big companies and big projects, said Bortolotti. According to Sattin, certain rules must be followed in order to convince sovereign wealth funds to invest in the country. The first is that the returns from the investment opportunities, in the long term as well, must meet their expectations, he explained. The second is that there must be stable regulations and the general political, regulatory and fiscal framework for investments must be in keeping with international standards. A top priority must be the creation of a professional one-stop service to communicate with investors and most importantly reassure them by giving guarantees about the L continued on page

13 CORPORATE REPORT Qui!Group: the Exchange on the Horizon A 16% yearly growth in the last decade, an impressive network of 15th businesses across the, a technology state of the art: here's a new national champion A record breaking company, not only for its growth rate on average 16% a year in the past 1 years but also, and more importantly, because it has managed to turn an ordinary lowvalue added service (supply of restaurant vouchers) into a cutting-edge, highly scalable business both in and abroad, thanks to its proprietary technology. The protagonist of this success is 57-year old Gregorio Fogliani, a first generation entrepreneur, who created Qui!Group, EUR 5 mn turnover in 213, one thousand employees (mean age 32 years, 7% women) in just over 2 years. Now Fogliani wants to export this model that has been so successful in. We want to expand in new foreign markets that are willing to invest in digital services and payments said Fogliani, who explained the reasons behind Qui!Group s success in the interview that follows. Question. You have experienced an exponential growth over the past 1 years. What was the factor that triggered it all compared to the competition? Answer. Diversification, without a doubt, which would not have been possible without technology. Ever since the Group was founded, we have implemented an innovative approach, which, over the past few years during which there has been a big boost in the digital economy has led us to the development of alternative business solutions, integrating the supply of restaurant vouchers with a series of services linked to Gregorio Fogliani, 57, a first generation entrepreneur, founder and CEO of Qui! Group e-money: loyalty programmes, Social Shopping systems, and Mobile Couponing, as well as company welfare solutions based on the use of digital channels. Q. Can you give us an example? A. We have accompanied the evolution from paper restaurant vouchers to e-vouchers and we have patented the dematerialised restaurant voucher, which can be validated using a special optical reader called Easy Voucher (winner of the Horeca24 Award as innovation of the year) or a smartphone thanks to the dedicated App. Q. How do you control and promote the enormous distribution network across the country: 15 thousand businesses and over 2 mn consumers? A. Our organisational structure allows us to streamline the various business activities, from the restaurant voucher service managed by Qui! Ticket to advanced company welfare solutions developed by Welfare Company, the baby of the Group, focused on the development of company welfare programmes 2.. Technology is our strength. Thanks to Paybay, our in-house software, we can manage the entire network of businesses, which we aim at converting into a digital network, so that the business owners can validate all the Qui!Group services: restaurant vouchers, coupons, gift vouchers, company vouchers, and more. Q. Based on the technology of your service, what fu- Qui!Group financial highlights mn Revenues 5, 525, 565, EBITDA 6,33 8,81 9,8 ROE (%) 7,2 8,9 9,4 ROS (%),8 1,2 1,3 Source: company data ture developments should we expect? A. We implement scalable technology, which can be easily integrated with the technological systems of client companies and with solutions that comply with the international standards concerning online payment security. As for mobile and e-payments, we are integrating prepaid cards, e-money, and e-services into a single offering, i.e. a digital wallet. It is in this perspective that we have entered into agreements with Olivetti and CartaSi to integrate Qui!Group technology into Olivetti cash registers and CartaSi POS. Q. Which markets are you targeting now? A. Europe is, of course, a very dynamic and interesting market, but we are also targeting Eastern Europe and BRIC countries, especially Brazil, which, over the past few years, has proved its focus on competitiveness. We want to invest in strategic projects in Brazil and we will launch collaborations with successful partners who want to boost their business. Over the years, we have consolidated our expertise in managing complex projects in synergy with partners, such as Poste Italiane, Enel, Telecom, Financial Institutes, Research Centres, and Universities. Our partners must share our innovation philosophy and focus on the unspoken requests of the target. The 1-y trend of growth Revenues ( mn) e Q. How will you promote internationalisation from a financial point of view? A. We like the idea of going to the Exchange. We are an innovative company and we still have plenty of products and initiatives to launch. We are deciding whether to choose the Milan stock exchange or an international one. We are thinking about launching an IPO or, why not, acquiring a listed company, or even entering into an agreement with a well-established industrial partner. We will take that step soon. Q. What are the business development forecasts in terms of profitability? A. Over the past few years, we have learned that it is possible to become competitive focusing simply on research and technology. In the past three years, our imperative has been to invest in innovation. We have done so allocating EUR 15 mn to research and development projects that have allowed us to develop our business and consolidate our authoritativeness. From this year, we have decided that part of the liquidity will be invested abroad to support our international expansion. Our future international partners will be able to rely on a cutting-edge company and will have the opportunity to enter the Italian business scenario next to a Group that plays a leading role

14 KPMG Corporate Finance Leader in M&A, Advisory, Strategy, Restructuring & Valuation Services Annual Survey KPMG Corporate Finance acted as financial advisor to the Unipol Group in the disposal of some insurance assets to KPMG Corporate Finance acted as financial advisor in the merger of BP Mezzogiorno, BP Ravenna, BP Campania with BPER KPMG Corporate Finance acted as financial advisor to the Croatian Government in the disposal of a majority stake in to KPMG Corporate Finance and Nolan, Norton Italia acted as financial advisors for in the disposal process of a 1% stake and the signing of a five years service contract with ICE of C&IB In Progress May ,7 mln March 214 Value not disclosed March 214 KPMG Corporate Finance acted as sole financial advisor to Banco Popolare in the disposal of its 99% stake in to January 214 KPMG Corporate Finance acted as financial advisor to Assicurazioni Generali S.p.A. in the acquisition of a 3% stake in and in the determination of the adequate cash compensation in the squeeze out of the remaining minority shareholders 43,8 mln June December 213 KPMG Corporate Finance acted as sole financial advisor to Assicurazioni Generali in the disposal of its 1% stake in KPMG Corporate Finance acted as advisor for the drafting of the Strategic Plan of the company KPMG Corporate Finance acted as sole financial advisor in the disposal of Tecnowind S.p.A. to a pool of private investors 2 mln August 213 that assumed the disposal of the company s entire share capital to KPMG Corporate Finance acted as financial advisor for the sale of a consumer loan portfolio May 213 April 213 April 213 KPMG Corporate Finance Milano: Via Vittor Pisani, 27 Tel Roma: Via Ettore Petrolini, 2 Tel Bologna: Via Andrea Costa, 16 Tel Giuseppe R. LATORRE, Partner, Head of Corporate Finance Maximilian P. FIANI, Partner, Head of Technology, Media & Telecommunications Simone MAURIZIO, Partner, Head of Valuation Fabrizio MONTARULI, Partner, Head of Strategic Services Maurizio NITRATI, Partner, Head of Real Estate Alessandro CARPINELLA, Partner, Head of Public Sector to 179 mln November 213 KPMG Corporate Finance and KPMG Restructuring acted as financial advisor in the debt restructuring process of KPMG Corporate Finance acted as sole financial advisor to Banco Popolare in the disposal of its 1% stake in to June 213 A unique survey of players, teams, numbers and opinions Trend Forum: the sentiment of top bankers. Is a new season coming? M&A Rising numbers for 214 League Table The rankings by amount and number of deals Database Top 5 M&A deals in 213 Database The Lombard credits for M&A deals Equity CM And then came the time to reap Debt CM Corporate bonds, a new marketplace Who's Who The people in Corporate and Investment banking WITH THE COOPERATION OF 26

15 Forum Corporate & Investment banking Survey On the spot: Business Growth, Profitability Trend in Advisory FEDERICO IMBERT CEO Credit Suisse in, Co-Head Investment Banking finance business, which will remain very active, the performance of the equity capital market will be highly dynamic, with IPOs, capital increases, accelerated bookbuilding and equitylinked transactions, and we're also anticipating a strong recovery of the M&A business. Pier Luigi COLIZZI Head of Investment Banking at Barclays Boria: I too think the most appetizing C&IB segments in the medium term will be those tied to equity capital markets and equity-linked products, with stock market floats, capital increases aimed at strengthening equity mainly in the FIG or for funding of acquisition /consolidation operations, as has occurred recently in the building /concrete sector. I also expect to see deals to rationalize investment portfolios through direct sales on the block trades market (ABBs) also following the termination of a large number of shareholder agreements and company operating finance agreements at highly advantageous conditions through the issue of convertible / exchangeable bonds. Ten bankers from the major institutions gave Lombard their opinion about corporate and investment banking activity in 214. The overall sentiment has definitely improved with respect to 12 months ago, but several question marks remain as to whether clients will acknowledge the greater complexity of the market also in terms of fees by Pier Paolo Albricci L ombard: Compared to 12 months ago what are the biggest differences visible on the market and which C&IB segments are likely to be the most interesting in the medium term? Mayr: Companies are increasingly experiencing the need to diversify, expand and broaden their sources of borrowing, also using debt and/or equity-like instruments, one of the goals being to establish financial structures that are sustainable over the medium-term. We're therefore expecting continual growth of the segment related to high yield bond issues to replace syndicated loans and, among smallmid corporate clients, the development of instruments such as mini bonds and hybrids (mezzanines). In parallel, a new market opportunity has emerged in the form of equity-linked products (debentures and exchangeable bonds) mainly on the equity capital market. FILIPPO BORIA Della Ragione: I agree, because after a deleverage or restructuring process many companies are finding they have sufficient cash for bolt-on or transformational acquisitions in an economic scenario benefitting from a relatively low cost of money. The most likely trend is to invest in growing the core business, with the option of gradually shedding non-strategic assets. This situation could therefore offer an investment opportunity for private equity funds. Imbert: Several factors have combined to strengthen the investment banking business: extreme narrowing of the sovereign debt spread, more optimism among international investors both in relation to the Italian economic system and to Italian companies, the privatization plan announced by the government and the fact that banking industry capital levels have been brought into line with the new standards. Lombard: So what are your predictions for each business area? Imbert: Alongside the leveraged 28 Head of Corporate&Investment Banking in, BNP Paribas Massimiliano RUGGIERI Head of Investment Banking in, Morgan Stanley Colizzi: Also the first time issuers supported by high liquidity, a low interest rate environment and investors' willingness to consider riskier assets will strengthen the activity of debt and equity capital markets. As for industries, natural resources, power, utilities and telecommunications, traditionally strong sectors, are still expected to stage most of the CIB business, alongside retail, real estate and financial insititutions. ANDREA MaYR Chief of Investment Banking at Banca IMI Francesco ROSSI FERRINI Senior Country Officer for, J.P. Morgan Marco MORELLI Vice Chairman C&IB EMEA, BofA Merrill Lynch Della Ragione: International equity investors' rising interest in companies listed and operating on European markets is leading MASSIMO DALLA RAGIONE Co-Head Italian Advisory at Goldman Sachs Vito LO PICCOLO Head of ECM & Iberia, Deutsche Bank Alessandro DAFFINA CEO of Rothschild L O M B A R D 29

16 Corporate & Investment banking Survey Forum to IPOs which, like recapitalizations in the banking sector, are likely to be a leitmotif throughout 214. In addition, the accompanying low interest rates and banks' need to proceed on the deleverage course will aid development of the bond market. Lo Piccolo: We see appetite for primary transactions in particular from Southern Europe. ECM activity in is expected to pick up in 214 with more than 6 bn of banks rights issues already announced and more possibly to come post AQRs. On top of that we expect several large IPOs to be executed, Fincantieri, Sace and Enav possibly, as well as Poste Italiane will be the largest ones but many others will come. Lombard: It also seems everyone also agrees that we can look forward to healthy recovery of the M&A business. Correct? Rossi Ferrini: Well, I don't see any signs of improvement compared to 12 months ago. We expect the activity to continue to be driven primarily by corporates, who are repositioning their portfolios to pursue growth opportunities ahead of the next economic upcycle as well as cost synergies and continuous portfolio rationalisation. On the other hand, the pace of financial sponsor activity remains slow, with few sizable deals being completed despite an increasing number of portfolio companies announcing an intention to trade. Imbert: We see that confidence in and appetite for M&As among the CEOs of the biggest European companies has grown steadily since 211 and that M&As have become the favored option for the employment of high cash reserves currently held in company accounts. We then have to consider investment funds with around $1,1 bn of capital available but not employed, an amount higher than even the 28 peak figure. Ruggieri: In fact, financ i a l s p o n s o r s a r e extremely active on primary/carve-out deals. But compared to twelve months ago I'm seeing a more selective approach of the counterparties, focus on situations of market consolidation and on targets with unbalanced positions on international markets and also an interest in strategic operations including operations that are of far more modest dimensions than in the past. Morelli: The gradual rise in interest in investments in among foreign strategic or financial M&A , ,5 DCM Revenues crash Revenues Amt Deals (no.) Source: Dealogic as for the domestic and cross border market Less deals but more revenues Revenues Amt Deals (no.) Source: Dealogic - all kind of debt products, for Corporate, Fig, Sovereign, Local Authorities, covered bonds and securitisation investors, especially in classic Italian goods sectors (fashion, furniture, consumer goods), in infrastructure and in the industrial sector started in the second half of 213. Lombard: What are the most interesting opportunities? Daffina: The best deals are connected to the growing phenomenon of privatizations and to the ECM ,5 37,5 Deals on the rise Source: Dealogic as for all kinds of equity-linked facilities, Abb, convertible, right issues Syndicated loans Revenues Amt Deals (no.) Less amounts Revenues Amt Deals (no.) Source: Dealogic as for the Italian market - Revenues are intended for investment banks sectors of luxury goods, food & beverage, mechanical engineering, retail, pharmaceuticals and infrastructure. However the general atmosphere on the market remains cautious and we can see it in the amount and type of contractual guarantees requested by the purchasers and in the complexity of negotiations, although there has been a partial recovery of business with respect to twelve months ago. Mayr: I think it's important to consider that a consolidation process has begun, resulting in the creation of new national and international champions by means of transformational M&A operations both on the domestic and international markets. The Fincantieri /STX, Atlantia/ Gemina, and Impregilo-Salini deals are all examples of this dynamic. Lombard: Are the multiples you're working with in the M&A sector higher or lower than in the past two years? Rossi Ferrini: Current multiples are generally higher when compared to the average of the last two years, though volatility continues to be high. On the other hand, multiples have been on a gradual recovery trend since the second half of 21, pricing the progressive improvement in the status of the global economy. Boria. The multiples are substantially stable, except for certain sectors, like luxury goods and, generally, companies in the classic Italian goods sector, which because of the particularly favorable outlook and/or premium positionings, are now able to attract wealthy investors capable of identifying particularly significant valuations /prices. Colizzi: We expect a slight increase in transaction multiples, supported by an improvement in the business confidence of foreign strategic buyers and the liquidity in credit markets. Lombard: In which sectors are multiples rising faster? Mayr: In particular in the luxury sectors, but also in financial institutions and the industrial sector. We're also seeing greater appreciation of companies with significant growth potential in new markets/geographical areas and/or where the scarcity effect is more pronounced. D a f f i n a : I t m a i n l y depends on whether the asset in question is of high quality and exposed to international markets. In general, we're seeing an improvement in the implicit multiples of completed transactions, depending on the type of operation and the business sector. Morelli: The increase, which is moderate, has occurred in sectors that are more exposed to the economic upswing cycle, while sectors that have proven to be Top Banks by Revenues in C&IB,,, Rank Bank Revenue mn % Share Rank % Share 1 UniCredit 98 1,9 2 8,9 2 Banca IMI 9 1,3 4 8, 3 BNP Paribas 65 8,6 8 4,3 4 Mediobanca 51 5,7 3 8,5 5 Goldman Sachs 47 5,3 11 2,9 6 Deutsche Bank 46 5,2 5 6,4 7 JPMorgan 45 5,1 9 3,9 8 Credit Suisse 39 4, 6 5,9 9 Morgan Stanley 38 3,9 15 2,1 1 Barclays 34 3,7 12 2,9... in Fixed Income Rank Bank Revenue mn % Share Rank % Share 1 UniCredit 62 12,4 1 17,2 2 Banca IMI 54 1,7 2 12,6 3 BNP Paribas 45 9, 3 6,1 4 Deutsche Bank 24 4,9 16 2,6 5 Goldman Sachs 22 4,4 19 1,7 6 Credit Agricole CIB 22 4,3 11 3, 7 Natixis 2 4, 1 3,3 8 Citi 2 4, 13 2,8 9 Morgan Stanley 19 3,8 18 2,5 1 Mediobanca 18 3,7 4 5, Source Dealogic, as of may * C&IB includes DCM, ECM, M&A and Loan transactions. Note: Dealogic Revenue Analytics employed where fees are not disclosed... in M&A Rank Bank Revenue mn % Share Rank % Share 1 Banca IMI 25 9,7 4 7,5 2 UniCredit 2 7,8 11 3,9 3 Lazard 2 7,8 5 7,2 4 Goldman Sachs 19 7,5 6 6,6 5 Mediobanca 19 7,4 2 9,3 6 Deutsche Bank 17 6,6 3 8,1 7 Barclays 16 6,1 18 1,5 8 JPMorgan 12 4,8 17 2,1 9 Credit Suisse 11 4,5 8 4,3 1 Morgan Stanley 11 4,1 1 4,1... and in ECM Rank Bank Revenue mn % Share Rank % Share 1 UniCredit 16 1,9 6 5,5 2 JPMorgan 15 1,2 1 4,3 3 Mediobanca 13 8,8 2 1,7 4 BNP Paribas 12 8,3 9 4,4 5 Banca IMI 12 7,8 8 4,6 6 UBS 1 6,9 4 8,4 7 Credit Suisse 9 6,2 3 9,7 8 Morgan Stanley 9 6, 24,4 9 BofA Merrill Lynch 8 5,2 1 15,3 1 Goldman Sachs 6 4,1 14 1,4 3 31

17 Corporate & Investment banking Survey anti-cyclic and resilient display a steady trend. Della Ragione: 213 has witnessed an increase both in the reference trading multiples of all the main sectors, and in the transaction multiples. These values had a decisive influence on the best bond market conditions that have allowed companies to refinance and borrow at lower costs, leading to higher evaluations than in past years. Lombard: Do you think prices are still as good as twelve months ago? I m b e r t : 26% of the European market trades a t a d i s c o u n t w i t h respect to the theoretical replacement value, against a long-term average of 15%. So despite rising multiples we're convinced that external growth through acquisitions remains a highly attractive strategy. The sectors where we've seen the most intense activity in 213 on the international stage (compared to the past 1 year average) are food, tobacco, consumer durable goods and energy. Less buoyant sectors included automotives, banks and pharmaceuticals. Lombard. Will the declining profitability of the C&IB business hamper the development of the activity at this stage? Della Ragione: No, the profitability of the C&IB business has no effect on the development of the activity, if it is construed as the creation of value for clients. Advisors and merchant banks can offer an effective platform of specialized consultancy plus innovative solutions for company 32 Revenues The breakdown by business segment mn Total revenues M&A rev Dcm + loans rev Ecm rev Source: Dealogic as for the Italian market - Revenues are intended for investment banks financing and capital structure optimization. Mayr: That's true. In highly complex situations in which market conditions require companies to adopt extraordinary measures in order to remain competitive on increasingly global markets, where size has now become a basic prerequisite for competiveness, the fees paid to merchant banks are very low when considered against the size of the negotiated transaction, and more than offset by the overall economic returns. Boria: I see profitability of the C&IB business more as an obstacle than a growth opportunity. The profitability requirements and minimum targets associated with C&IB activities (especially advisory services) don't always match the current cost containment strategies of client companies and their propensity to appreciate in full the value added of the service rendered. Ruggieri: The business development risk is that operators are obliged to become increasingly selective with regard to the number of assignments they are handling in order to retain sufficient levels of profitability to attract new resources and kickstart a virtuous circle. Morelli: It's clear that pressure remains high on the profitability levels of the various C&IB products, both in relation to returns on loans and advisory and placement commissions. This is due to the current macroeconomic context in general combined with the high level of competitiveness that persists in the industry. Lombard: So what's the recipe to create a virtuous circle? Imbert: a sophisticated and profitable advisory service providing all-round client support, offering innovative financing and capital access solutions and access to investors on a global integrated platform. In addition, the operative structures have become relatively lean and if growth and activities continue to build it could lead to permanent structural consolidation. Colizzi: It is my belief that the delivery of comprehensive advisory and financing solutions (equity and IG/HY debt) to support clients strategic transactions represents a strong opportunity for profitability of the business. Della Ragione: Merchant banks play a fundamental role in the business of building value for their clients and they're able to identify and exploit opportunities sometimes unique also in complex situations. L OYSTER EUROPEAN SELECTION - Classe R EUR Per gli Investitori Istituzionali. + 17,1 % - info@oysterfunds.com Performance dal 31/3/13 al 31/3/14 +22,6 % Fondo Benchmark : STOXX Europe 6 EUR (net return) Rischio minore Rendimento potenzialmente più basso Rischio maggiore Rendimento potenzialmente più elevato La scala del rischio va da 1 (rischio più basso) a 7 (rischio più elevato); il grado 1 della scala non significa tuttavia che il portafoglio è totalmente esente da rischi. C R E A T E D T O P E R F O R M Il benchmark indicato è stato scelto per consentire un miglior raffronto dei risultati della gestione del comparto. Si tenga presente che il riferimento ad un indice è effettuato unicamente con finalità informative; la politica di investimento del comparto non contiene alcuna menzione all indice. Il rendimento indicato è al lordo degli oneri fiscali. I rendimenti passati non sono indicativi di quelli futuri. 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18 C&IB Trend Advisory: Rising numbers for 214 Three positive factors are combining in the market: privatizations, financial investor appetite, mainly from the East, for the Italian champions and brands, and a strong boost towards consolidation in strategic business by Stefania Peveraro "The confidence in and appetite for M&A operations of the CEOs of the biggest European companies has been at an all-time high since 211 and M&A activities have reclaimed their status as the preferred option for the employment of the ample cash resources currently available in corporate financial statements. Federico Imbert, country manager of Credit The signals of macroeconomic improvement suggest that M&A activities are likely to grow throughout the year Suisse in after a long past in the ranks of JP Morgan, is not the only positive voice with regard to the upward trend of Italian M&A. The signs of recovery can be seen both in the number and the size of operations, pointing to a return of industrial and financial foreign venture capital to, in addition to the beginning of a consolidation process that is making new national and international champions emerge, by means of transformational type M&A operations, agreed Vincenzo De Falco, M&A manager of Banca Imi, the biggest Italian operator in terms of the number of deals. Further confirmation came from Alessandro Daffina, CEO of Rothschild, which is handiing the Fincantieri IPO on behalf of CDP. The signals of macroeconomic improvement suggest that M&A and equity capital market activities can be expected to continue to grow throughout the year. The recovery announced in 213 while most of was beset by the recession gained momentum in the second half to the point that it started to attract the attention of foreign investors, who were keen to enhance their portfolio with top notch companies that, simply because they were in, were undervalued compared to similar companies located in so-called core European countries. This was the impetus for the foreign shopping frenzy in, which was both aimed at creating partnerships sealed with minority interests and acquiring the entire capital stock of the Italian company to bring it into the acquiring group's fold. A crisis situation is not only associated with lower EV valuations, it also makes it easier to identify dynamic companies capable not merely of surviving the market difficulties but of actually growing. This type of ability has been mainly found in among family-run concerns that have Massimo Della Ragione, co-head Italian Advisory at Goldman Sachs, led his company to the top post in the 214 Lombard ranking of advisors in terms of value of announced deals. Part of its success was due to the strong relations of Goldman Sachs with the Fiat-Exor Group, which completed two of the major deals of the year Vincenzo De Falco, M&A manager of Banca Imi, which ranked first in number of deals in the Lombard classification. De Falco, a former managing director at Credit Suisse, is optimist about the trend of the advisory business." The signs of recovery can be seen both in the number and the size of operations, pointing to a return of industrial and financial foreign venture capital to," De Falco told Lombard Illustration by G. Scarabottolo 34 35

19 C&IB Top advisors in Italian M&A by amount of deals Rank Advisor 213 deals 212 deals 211 deals 21 deals Goldman Sachs 7, , , Barclays Capital 6, , Lazard 5, na na 3, , Banca IMI 4, , , , Mediobanca 3, , , , Deutsche Bank 3, , , , BofA Merrill Lynch 2,7. 3 1, , JP Morgan 2, , , Banca Leonardo 2, na na 1, BNP Paribas 2, , , Rothschild 1, na na 2, , Fineurop Soditic na na Morgan Stanley na na Nomura Italia KPMG na na , Citigroup na na , Deloitte na na 2, UBS , , Credit Suisse , , , Translink Strempel na na Source: Lombard analysis on advisor data of announced deals for each year made timely investments to develop their international business and that have now decided to take the next step by opening up their capital to cash injections from new investors. One of the most recent cases is Versace. The family decided to accept a 2% investment from US private equity colossus Blackstone. This is an absolutely paradigm-shifting move, not only because a shareholder from outside the family was been admitted among the ranks of the maison, but also because an incoming shareholder of this type will inevitably change the management style of the entire group in financial and organizational terms, a process that is far from easy in the fashion world. The same concept applies to other fashion brands that have and by number of deals Banca IMI KPMG 23 na Mediobanca Lazard 16 na BNP Paribas Deloitte 12 na Rothschild 12 na Fineurop Soditic 12 na Tamburi & Associati 1 na Deutsche Bank PWC 8 na Goldman Sachs Banca Leonardo 7 na Barclays Capital JP Morgan Credit Suisse Bofa Merrlll Lynch Nomura Italia UBS Morgan Stanley 1 na 4 6 Source: Lombard analysis on advisor data of announced deals for each year opened their capital in recent months to significant minorities of the private equity funds, which are also frequently foreign. Last July's sale of an 8% stake in Loro Piana to the French colossus Lvmh for 2 bn, with the family of the king of cashmere holding onto just 2%, is another clear example. The attention foreign investors Focus Privatizations Eight on the launch pad Privatizations are coming to the forefront in the second half of the year, according to a recent KPMG report on M&A. The disposals, from which the government expects to raise 1-12 bn, should include the following companies, four of which are owned by CDP itself: Sace (expected proceeds: 5 bn). 6% of the company's capital, which is fully-owned by CDP, should be sold. This agency provides companies with export credit and credit insurance. According to rumours, the most likely bidder is Assicurazioni Generali, of which Fondo Strategico Italiano holds a stake (8%). This circumstance could give rise to some issues of conflict of interest; Poste Italiane (expected proceeds: bn). The procedure for the listing of 3-4% of the group fully owned by the Treasury is underway; 5-6% of the capital placed for sale will be reserved to institutional investors, 2-5% to employees, and the residual portion to retail clients; CDP Reti (expected proceeds: 3.7 bn). The holding company controlled by CDP acts as a safe for strategic infrastructural networks and it currently owns 3% of Snam (gas grid); the transaction which should lead to the transfer of 29.85% of Terna (electricity grid), currently held by CDP, to CDP Reti, is underway; TAG Trans Austria Gasleitung GmbH, currently controlled by CDP Gas, should also be contributed to the company, while it is not yet clear whether the equity investment in Metroweb (optical fiber network) owned by Fondo Strategico Italiano will follow suit. These transactions are intended to prepare the sale of 5% of CDP Reti through its listing or sale to institutional investors; ENI (expected proceeds: around 2 bn). The government intends to sell a 3% stake in 's largest oil group gained when ENI had completed the buyback of 1% of its capital (worth approximately 6 bn) and own shares in portfolio were cancelled; this transaction would enable the Treasury to increase its current stake from 3% to 33% and keep the investment above the threshold for tender offers; Fincantieri (expected proceeds: around 6 mn). The group, which is one of the world's leading shipbuilders, is 99.4% owned by Fintecna, a holding company in turn fully-owned by CDP. The government intends to sell a non-controlling interest and the group's listing on the Exchange would be backed by a 3 mn capital increase; Giuseppe Bono (above) and Francesco Caio, CEOs of Fincantieri and Poste Italiane STMicroelectronics (expected proceeds: 7 mn). The Italian-French company specialised in consumer electronics components and listed on the Paris and Milan Exchanges is indirectly held by the Treasury through a 5% owned holding company (the other 5% is held by the French government). The sale of 14.5% of its capital should actually be a clearing account with CDP; Grandi Stazioni (expected proceeds: 6 mn). 6% of the company, whose mission is to requalify the thirteen main Italian railway stations, is held indirectly by the Treasury (through Ferrovie dello Stato), while theresidual portion is held privately by Eurostazioni. The sale of the state-owned stake could materialize through an increase of private shareholders; ENAV (expected proceeds: 1 bn). The Italian air navigation service provider, fully state-owned, could be sold through its listing or in a competitive auction. Trend have paid to Italian-made products beyond the fashion industry has grown this year, in correspondence with a flurry of global mega deals. Foreign investors' attention has touched various industrial sectors, but all have a shared focus on sound companies with a strong brand, which could be potentially leveraged on the international stage if driven with a wellcrafted global distribution policy. The first move in this logic was made by Russian petroleum group Rosneft, which acquired a share in the Pirelli-Camfin group from the Clessidra private equity fund. Clessidra had made the acquisition with exceptional timing just a few months beforehand, in the framework of a vast operation of division of activities between the group headed by Marco Tronchetti Provera and the Malacalza family. And the same concept is clearly applicable also when the target is not merely a minority interest, but the entire business. As shown, the latest two divestments by Charme, the investment vehicle in which Montezemolo sgr acts as an advisor with the controlling stake of Poltrona Frau transferred to the US Haworth (which will shortly announce a total takeover bid) and with Octo Telematics sold to the Russian company Renova. The Cinven fund took the same type of approach at the start of 213 in the sale of the aerospace activities of Avio to General Electric. Activities in the fashion sector are ongoing and dynamic. Roberto Cavalli negotiated for months with Permira to sell a majority stake in an operation valued at around 45 mn, although the bid did not go through, according to the latest rumors. Last February Krizia divested the maison founded by Mariuccia Mandelli in 195 for $35 mn to Shenzhen Marisfrolg Fashion, a fashion house positioned at the high end of the Chinese domestic market. Again in February the Qatarbased investment fund Mayhoola for Investments Spc, the same investment vehicle that acquired Valentino in 213, scooped up 65% of the capital of the Vicenza-based Forall, proprietor of the Pal Zileri brand, from the four Italian families that founded Barizza, Bellet, Miola and Ghiringhelli, joining the Egyptian company Arafa Holdings. A n d a g a i n i n F e b r u a r y a n announcement was made that in 36 37

20 C&IB Trend the framework of a preliminary agreement the Chinese investors of the Lunar Capital fund will acquire 1% of I Pinco Pallino, the well-known high-end children's clothing brand hitherto controlled by the Opera sgr fund. Turning to January, Fortelus Capital sold the Bologna based luxury footwear and accessories brand Bruno Magli to the Swiss Da Vinci Invest. Finally, March saw the completion of the sale of the Mariella Burani brand, acquired for 2.6 mn by a Hong Kong-based investment vehicle called Pyrrho Investments; in detail, on the heels of a long administration procedure linked to the crack suffered by the company at the end of 2, the last assets still in the hands of the commissioners were transferred. This meant more than 1,3 garments and the entire legacy archive (preliminary designs and patterns), in addition to the group's brands. But M&As also operated in reverse. Precisely because, despite the crisis, there are still plenty of healthy companies in, they were able to take advantage of the opportunity to invest both in and abroad and expand their market shares or their offering in terms of products and services. This is an activity that concerns also SMEs and not just well-established brands like Campari, Prysmian, Interpump, and Recordati, which have adopted acquisitions as a consolidated international growth strategy. And let's not forget Fiat, which last year defined the final stages of the acquisition of the US colossus Chrysler, an operation that was completed at the beginning of this year with the announcement of the signing of an agreement for the acquisition of the 41.46% stake in Chrysler remaining in the hands of the Veba pension fund, and the new industrial plan worth 55 bn in investments, presented by Sergio Marchionne at the beginning of May. The advisory activity supporting Focus Fashion & Luxury Acquirors move from West to East The manufacturing excellence and prestige of Italian brands continued to attract the interest of investors. The most interesting aspect was the geographical origin of bidders acquiring Italian luxury goods companies: on average, 8% of the deals completed in 2-29 were domestic transactions (376 deals), a figure which has dropped to 6% in the last four years. The most active bidders for Italian luxury goods companies were Western investors in the ten-year period until 29 (France, the US and the UK), while these last few years have seen the gradual consolidation of the new emerging countries: from China to Korea, from India to Thailand, as well as sovereign investment funds from the United Arab Emirates to Singapore and Qatar. This testifies to the need to conquer niche sectors and prestigious brands which are genuine status symbols to meet the demand of a growing affluent market, according to an M&A report for 214 recently released by KPMG. Competition in the luxury market has rocketed and companies operating this sector, after winning the relevant markets, should now consolidate their activities and, above all, customer loyalty. Indeed, in 214, consumption growth rates in this sector are expected to be higher than those posted in 213. A clientele consisting of a new global consumer, ready to shop even outside his/her own country, who relies heavily on word of mouth and social media and makes massive use of the Internet to search for information and compare prices and to establish a point of contact and exchange with the brands. A consumer who is more interested in the product s intrinsic values (quality, exclusivity and craftsmanship) rather than its external ones (recognisability of the brand and aesthetic component) and increasingly sensitive to the origin... but in 213 the French were on the forefront Target Bidder Country Stake Amt Date % mn Loro Piana LVMH France 8 2, Pomellato Kering SA France Moncler Tamburi Inv. Partners Buccellati Clessidra La Perla SMS Fin. (Silvio Scaglia) Marcolin PAI Partners France Golden Goose DGPA, Gate Richard Ginori Guccio Gucci (Kering) /France Peck Intrapresa (Marzotto) Silvian Heach Vertis SGR na Source: KPMG M&A Report 214 M&As was therefore distributed among all types of actors, from the big international merchant banks like Goldman Sachs or JP Morgan, to Italian high street banks like Banca IMI and Unicredit, right down to small boutiques, frequently part of an international network, such as Translink Strempel or independent businesses like Fineurop Soditic. The big merchant banks clearly supported big businesses in the most important operations, which were legion. Indeed, in 213 M&As were completed for crucial opera- of the goods, for whom the Made In feature is a must. According to Fondazione Altagamma, no less than 8% of luxury goods consumers state that they check the origin of the products they buy, especially in emerging countries. In all the personal luxury goods categories, Made in brands are at the top of the preference list, and three times more desireable than Made in France products, except for watches, where Switzerland remains the country of choice. Italian luxury brands have gained market share in the long term, increasing Revenues ot top acquirors 3 22,5 15 7,5 23,7 Lvmh 8,1 Kering 28,1 9,7 29, Source: corporate report - Key: bn Toni Belloni (left), chief executive of LVMH, and, below, François Pinault, CEO of Kering tions for several of 's major corporations, handled in particular by Goldman Sachs, the top merchant bank in the Lombard ranking in terms of the value of announced deals (the top place was occupied by Mediobanca in 212). Rising to the top spots in the ranking were 9,7 from 21% in 1995 to the current 24% and almost reaching the 25% of French brands, however French holding companies are the driving force in this fast consolidating market, with a 29% share up from 25% in Last acquisitions completed in by large French conglomerates in recent years (Bulgari, Loro Piana and Cova acquired by LVMH and Pomellato, Brioni, Richard Ginori by PPR/Kering) are aimed at creating those large luxury platforms which Italian companies have failed to set up so far by combining the domestic brands. This failure to coordinate and join forces among the Italian system s brands prevents companies from reaching that critical mass and cash flow optimization required to successfully compete in a global market. Despite the loss of many small and medium-size companies which were not able to overcome the credit crunch, the true strength of Italian companies lies in a solid production chain and deep integration between the upstream (thread and fabric, skins, leather and fur production) and downstream stages of the crafting process. Research, innovation and testing on materials coupled with the ability of Italian fashion designers, express an artisan know-how of the Italian fashion and luxury industry which is absolutely unique and difficult to match for productions created in other countries. It is a strategic asset foreign operators try to gain through continuous acquisitions, as proven by foreign operators interest not only in the large Italian maisons, but also in the tanneries, weaving factories and skin and thread processing companies. also Barclays, Lazard and Bank of America Merrill Lynch, while Deutsche Bank and JPMorgan dropped a few places although they remained high on the scale. Among Italian banks, Banca Imi rose to fourth place, followed by Mediobanca. Also Banca Leonardo is performing well in ninth place. Among the deals that brought Goldman Sachs to the top of the ranking was the advisory service supplied to Generali in the completion of the Central-East European partnership between Leone and the PPF Group. The transaction will involve Generali's purchase of a 49% stake in Generali PPF Holding (GPH) for 2.5 bn to take full control of the insurance joint venture in Central-Eastern Europe, which is one of the main operators in the area. The acquisition of GPH was structured in two stages: 25% in March 213 while the remaining 24% will be acquired before the end of 214. The GS team with managing partner Massimo Della Ragione, who was directly involved in the deal, saw the bank engaged in execution of the transaction and valuation of the companies and holdings involved. Another important deal concerned the Exor/Fiat world. GS assisted Exor in the approximately 2 bn sale of a 15% stake in SGS to GBL, a family-controlled investment holding similar to Exor. The Agnelli family holding had acquired the SGS stake in 211. GS was involved in the structuring and execution of a transaction that is Exor's most important divestment since the IFI-IFIL merger and that freed up nearly 2 bn of cash for the group to use for future investments. Goldman Sachs has a long-standing relationship with Exor and the Fiat Group, and over the last 1 years it has been involved in all the main operations that changed the structure of the group, from the IFI-IFIL merger to the breakaway of Fiat Industrial, the conversion of pref