Italy: A Corporate/M&A: Mid-Market Overview

The Italian Corporate/M&A Market: Deal Making in a Year of Deep Regulatory Change

2026 opened with an Italy that is growing, but cautiously. According to the latest ISTAT projections published on 5 June 2026, Italian GDP is expected to grow by 0.7% this year – a slightly more optimistic figure than the estimates of the European Commission (0.5%), the IMF (0.5%) and the OECD (0.5%), which factor in more heavily the impact of rising energy costs tied to tensions in the Middle East. It is the fourth consecutive year of growth below 1%, yet the economy is holding up better than feared, supported by resilient domestic consumption – helped by wages recovering in real terms – and by investment flows linked to the National Recovery and Resilience Plan (PNRR). On the monetary front, the ECB deposit rate has stabilised at 2.00% since June 2025 (source: ECB), improving access to credit compared with the peak of the tightening cycle. Nonetheless, the geopolitical backdrop keeps uncertainty high around energy and global supply chains, making corporate financial planning more selective than ever.

An expanding M&A market, led by the mid-market

Against this backdrop, the market for M&A transactions showed greater vitality than expected in 2025. According to PwC’s analysis “Global and Italian M&A Trends 2025 and Outlook 2026”, announced Italian M&A transactions rose by 16% in number and 21.6% in value compared with 2024, reaching roughly USD64 billion in aggregate – a performance running counter to the global market, where volumes held steady while value concentrated on mega-deals. Private equity was the main engine: the LIUC Business School’s Osservatorio PEM recorded 551 PE deals closed in 2025, up 31% from 419 the previous year – the best result ever tracked by the panel – with private equity now accounting for 41% of the total value of the Italian M&A market.

According to Andersen’s latest European Corporate Insight for Q1 2026, Italy confirms its position as Europe’s third-largest M&A market by value, with EUR40.1 billion recorded over the preceding twelve months, behind the United Kingdom and Germany. Demand is underpinned by long-term structural drivers: generational change in family businesses, supply-chain aggregation in manufacturing, consolidation in financial services, and growing interest from international funds attracted by valuations that remain competitive relative to other Western European markets.

For 2026, PwC points to a cautiously optimistic outlook, with technology, industrial manufacturing and health industries set to drive volumes, propelled by artificial intelligence as an accelerator of industrial transformation strategies.

Four regulatory breaks that are redrawing the rules of the game

In 2026 the regulatory framework underwent significant changes on four fronts that no one active in M&A can afford to ignore.

Golden Power

Law No 4 of 15 January 2026 substantially reformed the rules on foreign investment screening. The reform was triggered directly by the infringement procedure opened by the European Commission (INFR(2025)2152) following the use of special powers in the UniCredit/Banco BPM transaction, which Brussels considered contrary to EU law on prudential supervision and the free movement of capital. The text introduces the principle that Golden Power is residual in the banking and financial sector: Italian government intervention is now subordinate to the completion of the ECB’s and the European Commission’s assessments. For deal makers, this translates into more complex timeline planning and greater multi-level co-ordination of regulatory processes. The scope has also been extended to intra-group transactions involving critical assets in strategic technologies – artificial intelligence, semiconductors, biotechnology, digital infrastructure – further widening the number of transactions subject to notification.

Sustainability reporting

EU Directive 2026/470, adopted on 24 February 2026 as part of the Omnibus package, narrowed the scope of the CSRD: the sustainability reporting obligation is now reserved for companies with turnover above EUR450 million and more than 1,000 employees, with listed SMEs definitively excluded from the regime. This regulatory shift does not, however, remove the relevance of ESG in deals: institutional buyers will continue to request sustainability data from targets as an integral part of the valuation process, even in the absence of a legal obligation. The information asymmetry that results becomes a negotiating variable in its own right.

AI Act

With the Digital Omnibus, approved by the European Parliament on 16 June 2026 with 423 votes in favour and awaiting formal adoption by the EU Council – expected by 2 August 2026 – the AI Act’s original timeline has been substantially redrawn. The obligations for standalone high-risk systems (Annex III: biometrics, critical infrastructure, recruitment, access to essential services, justice, democratic processes) are pushed back from 2 August 2026 to 2 December 2027; those for systems embedded in regulated products (Annex I: medical devices, machinery, lifts) to 2 August 2028. Confirmed for 2 August 2026, by contrast, are the transparency obligations under Article 50 and the activation of the AI Office’s enforcement powers over general-purpose AI models. For M&A, recalibrating the deadlines does not remove the practical relevance of technology due diligence: mapping the AI systems in use at the target, classifying their risk profile and defining the contractual implications remains an essential step for any institutional buyer, regardless of the new timeframes.

Capital Markets Decree

Legislative Decree No 47 of 27 March 2026, published in the Official Gazette on 14 April 2026 and in force since 29 April 2026, implemented the delegation under Law 21/2024 (the “Capital Markets Law”), substantially reforming the Consolidated Law on Finance (TUF) and the Civil Code provisions on the administration and control of companies. Of particular relevance for M&A players are the repeal of the interlocking-directorates ban, the new simplified regime for newly listed issuers and listed SMEs with a market capitalisation below one billion, the overhaul of governance systems (new Articles 2396-bis et seq. of the Civil Code) and the option to draft the offer document in a public tender offer in a language commonly used in international finance, with a summary in Italian: a legislative package that bears directly on due diligence, deal structuring and execution timing.

The operational challenges and how to address them

The market today poses three concrete challenges to those structuring complex transactions. The first is managing the multi-level regulatory path: Golden Power, merger control, prudential supervision and the AI Act form a system in which timelines add up rather than overlap, while the Capital Markets Decree requires, in parallel, that issuers and IPO-bound targets carry out a careful review of the by-laws and governance arrangements still aligned with the previous rules. Planning the transaction with an adequate time horizon and involving legal teams from the earliest stage has become a matter of execution, not caution. The second is the quality of ESG and technology information in the absence of uniform legal obligations: buyers must compensate with targeted contractual tools – specific representations and warranties, price-adjustment mechanisms, specific indemnities. The third is the persistent valuation gap between buyers and sellers, in a context where multiple expectations remain high: structures involving earn-outs, management reinvestment and vendor loans help narrow the gap, but call for more elaborate negotiation and attention to post-closing execution risk.

2026 is a year that rewards those able to read complexity as a competitive advantage rather than an obstacle.