Can Giorgia Meloni Italia SpA revive?

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Pdisplayed prominently at the bookshop at Linate airport in Milan there is a cover There is no doubt that you go in and out of the Modo (When we were masters of the world). The book about the Roman empire has been on the bestseller list since it was published in September. It shows the nostalgic nostalgia of the Italians for their glory which is quite old now. They could take solace from the fact that many Italian brands are still masters of the world: think of fast cars (Ferrari, Maserati, Lamborghini), stylish motorcycles (Ducati, Vespa), beautiful clothes (Gucci , Prada, Zegna) and accessories to go. with them (Fendi, Bottega Veneta).

Except that many of the famous pavilions and labels of Italy today – including all of them above – are not completely Italian. Many of them are either imported overseas, listed elsewhere or owned by foreigners. And together, they lag behind those of other large European countries in terms of value. The 30 biggest brands in Italy are both worth just a third of the top 30 in Germany and a quarter of that in France, according to Kantar, an analysis company.


Corporate Italy in general also suffers from the country’s signature braggadocio. The entire Italian stock market is worth less than €800bn ($860bn), almost twice the market capitalization of LVMH, the French owner of several Italian luxury brands (including Fendi). Milan’s borsa is smaller than those in Paris and Frankfurt compared to each country GDP (see table 1). In the last ten years it has also been lower than them (see table 2). Only five of the world’s 500 largest companies by revenue are from Italy, down from 13 in 1997; There are 136 Americans, 30 Germans and 23 French. Even Spain, whose economy is a third smaller than Italy, has 11 companies on the list. “Italians are world-class in creating companies but they are not good at managing and growing them,” says Stefano Caselli, dean of the Bocconi School of Management in Milan.

Photo: The Economist

This worries the Prime Minister of Italy. Giorgia Meloni. Her right-wing government wants to recreate Italian champions in industries from cars and energy to food and fashion. On February 6 he pushed the capital markets bill through the lower house of parliament. It is intended to attract more listings to the Milan stock exchange, prevent hostile takeovers and prevent large companies from incorporating in places like the Netherlands (the corporate home of Ferrari, whose shareholder largest, Exor, also part of it). The Economistin its parent company).

Proponents of the bill argue that it would remove a major obstacle to the creation of corporate behemoths – Italy’s shallow capital markets. Critics warn it could have the opposite effect. Fully 95% of shareholders in Italian registered companies are foreign, says Dario Trevisan, a lawyer who represents institutional investors. And foreigners fear that the bill favors Italians, by allowing public companies to issue shares to long-term shareholders, who tend to be domestic, with voting rights beyond size and , if their stake exceeds 9%, the ability to block certain board meetings. .

Photo: The Economist

Italian business could certainly do with deeper capital accumulation. Without it, many companies have no choice but to rely on bank loans to finance their growth. This is also true in other European countries, including Germany. What differs from Italy is that many of its leaders prefer to borrow from lenders rather than share power with other equity holders, says Andrea Alemanno of Ipsos, a research firm in Milan. Like Julius Caesar, says Mr. Alemanno poetically, they would rather be first in a barbarian city than second in Rome. Too often, the result is that companies take on too much debt and go bankrupt or are taken over by the government.

The other option is to stay small. Italy has 4.3m companies with less than 250 employees. That’s a third the size of Germany, an economy twice the size that’s home to the world’s most famous Mittelstand of small and medium enterprises. Such companies are responsible for 80% of employment and 70% of added value in Italy, compared to, respectively, 56% and 43% in Germany. About 95% of them have less than ten employees. These micro-enterprises, which tend to be far more productive than larger companies, employ around one out of every two Italian workers.

“We have a strong line of companies with 100 to 500 employees, but beyond that it becomes very thin,” said Corrado Passera, a former economy minister who runs Illimity, a bank that specialized in lending to small and medium-sized Italian companies. He and his family still believe very much the mouth and his spirit of enterprise. His wife built a network of veterinary clinics and his son founded a hotel business.

It is fun and easy to set up a company in Italy, insists Mr. Passera, especially if you are a technology entrepreneur. In 2012 the government in which he served passed the Startup Act, full of incentives aimed at fostering innovative tech companies. Eligible businesses are exempt from online incorporation taxes, as well as certain duties and taxes, and can take advantage of expedited visa procedures for their international workers and tax incentives for investors they have

Despite the high spirits of Mr. Passera, Italy has not yet a Silicon Valley to be on par with other places in Europe, not to mention the American version. Italy has the world’s tenth-largest economy but is outside the top 20 even among European countries in terms of investment in startups, according to Sifted, an online publication that tracks on such things. It has produced just two unlisted tech companies valued at $1bn or more (both in fintech). With luck, he may breed another soon. Bending Spoons, which helps clients design apps, has so far raised more than $500m, according to PitchBook, a data provider. But even that was left after Spain, which has four such “unicorns”. Germany has 33 and France 24.

Other promising Italian startups, like many of these Italian brands, are seeking their fortunes abroad. Newcleo, founded by three Italians, is developing new lead-cooled nuclear reactors. It has so far raised €400m ($430m). Its research and development center is in Turin. But its head office is in London. That’s because after a referendum in 1987 Italy phased out nuclear energy, which means there is no demand for its products in its home market. Ms. Meloni may try to bring it back as part of her clean energy movement. Then again, she probably won’t – certainty isn’t the forte of Italian governments.

Heavy regulatory burdens and legislative uncertainty are a problem not only for nuclear startups. All businesses in Italy are struggling with the same challenges, says Andrea Bonomi, chairman of Investindustrial, a private equity firm based in London that focuses on Italian companies. If Ms. Meloni wants Italia SpA to succeed, that’s where she should focus her attention.

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