June 25, 2020 / 3:22 PM / 10 days ago

Italy's special powers on strategic assets could affect M&A deals

MILAN, June 25 (Reuters) - The Italian government’s special powers to shield key industries from unwanted foreign interest that were strengthened during the coronavirus emergency could interfere with or slow down M&A deals in the country, bankers and lawyers said on Thursday.

After the coronavirus outbreak, Rome bolstered “golden power” protections against foreign takeovers by including more sectors such as banking, insurance, health and food, and transactions within the European Union.

Italy’s ruling coalition was concerned that foreign investors could take advantage of the volatility triggered by the coronavirus crisis to buy assets in industries deemed as strategic for the country.

The protectionist move, however, is seen as getting in the way of M&A activity, already subdued due to economic slump that followed the health emergency.

“The expansion of the golden powers will certainly impact cross-border deals ... if nothing else, it could slow them down”, Michele Marocchino, managing director for Italy at investment bank Lazard, said during the presentation of a report about M&A and private equity activity in Italy.

Marocchino added that some insurers are looking into developing products to help companies protect themselves against the risk and the cost of an operation being blocked by the government using the so-called golden powers.

In the past, Rome used to screen only a few deals, but this is bound to change, said Gianni Martoglia, equity partner at Italian law firm Gatti Pavesi Bianchi.

Martoglia added, however, that the consumer sector, not considered strategic under the law, could attract heightened interest from overseas investors, including China.

“There is some indication that Chinese firms are beginning to hunt for bargains overseas again”, the law firm said in the M&A report, presented on Thursday. (Reporting by Elisa Anzolin; Editing by Steve Orlofsky)

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