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

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Working with private equity is a challenge, but it’s also “a fantastic opportunity to scale up,” Dal Lago said in an interview. “As an entrepreneur, you need to understand that it’s not about the size of your stake, but what your stake is worth.” 

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Dealmakers are finding Italian companies to be surprisingly competitive, besting Germany’s vaunted Mittelstand by some measures. 

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While Italy’s productivity has stagnated for decades, its manufacturing firms with 50 or more employees add more value per worker than their German and French peers, according to Eurostat data that measures economic output divided by labor input. 

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Exports are on the rise too: Italy was the world’s fifth-largest exporter in 2025, up from eighth a decade earlier, and is vying with Japan for fourth place this year, according to Fondazione Edison, a Milan-based think tank. 

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Despite Italy’s deep industrial base, founders historically have been reluctant to open the door to outside capital, preferring to work with local banks and maintain family control. 

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The penetration rate for private equity or venture capital ownership of non-listed Italian companies is the lowest of any country in Europe — it’s nearly double in Germany, and almost four times higher in France, according to data from S&P Global Market Intelligence.

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Yet as they near retirement, more founders and second-generation entrepreneurs are starting to listen.

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Goldman Sachs Group Inc. has quintupled the size of its Milan office over the past seven years, targeting the growing number of lending and investment banking opportunities. “We’ve never seen so many private equity firms in Italy,” said Marco Paesotto, co-head of investment banking in the country. 

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Pitchbook, a financial data and market intelligence platform, counted 679 private equity deals in Italy in 2025, a 16% year-on-year increase. The UK, France and Germany all saw slowdowns. 

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Remaining independent was a reliable strategy when niche producers could rely on a loyal, global customer base. But with trade more complicated and disruptions more common — both geopolitical and technological — an expansive approach has its benefits.  

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SEMA Systems, a tech company that makes automated fire safety systems for trains in Rho, near Milan, has returned to growth after being rescued in 2021 by Chetan Sahai, a former investment banker with career stops at McKinsey & Co.,  Lazard and GE Capital. 

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Founder Armando Iaquinangelo, who invented a system that increases safety and minimizes false alarms — a critical feature because an erroneous alert can bring a train to a costly halt — continues to collaborate with SEMA. 

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Sahai is taking a structured approach to building the business. After heavily investing in R&D, he now expects to quadruple last year’s revenue by 2027. “We have possibly the best technology in the world,” he said. “We can think big, bring other companies under our umbrella, look beyond Italy and beyond the rail sector for further growth.”

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For acquirers, Italy’s fragmented manufacturing sector provides fertile ground for buy-and-build strategies, said Eliana Catalano, managing partner at BonelliErede, a Milan-based law firm, who is focused on PE and M&A. 

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Family owners have also become more sophisticated, while bank consolidation in Italy has taken away some financing options for mid-market companies to solve succession or family-stake issues, said PAI’s Bellino.

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Despite the renewed activity, significant structural weaknesses remain. Italy’s energy costs are among the highest in Europe, while red tape and lengthy legal processes continue to deter investment.