State-owned Italian bank Cassa Depositi e Prestiti (CDP) is to set up a private equity fund to help family businesses, but a family business expert questions to what degree it will achieve its aim of helping them go public.
The initiative is the first of many more planned by the CDP as part of its plans to invest in domestic companies and help boost the country's economy.
The private equity fund is one of the pillars of the new business plan.
Former Goldman Sachs banker Claudio Costamagna will be at the helm. He says the fund will buy minority stakes in promising companies that are seeking scale and help their management, suggesting this could help double the number of companies on the Milan stock exchange.
CDP will act as an anchor investor and invite foreign investors and sovereign wealth funds to buy shares in the companies.
Professor Alfredo De Massis, director of the Centre for Family Business at Lancaster University says the fund will help business go public, but some might be reluctant to initial public offerings (IPO) due to cultural bias.
De Massis said: “On one hand the fund will likely increase the number of family firms doing an IPO. On the other hand we have to keep in mind the there is a sort of 'cultural bias', which characterises the attitude of family entrepreneurs towards IPOs.”
“We must consider that making an IPO means opening up the equity to potential outsiders, which threatens socioemotional wealth,” he added. Socioemotional wealth refers to the identity and relationships that are wrapped up in the family business.
Italy is the home to 750,000 family businesses that make up 90% of the private sector. Car manufacturer Fiat, founded by the Agnelli family is one of the most successful, with revenues reaching €96 billion in 2014.
However, since the global financial crisis, in which Italy suffered a long recession, many large family firms have been taken over by foreign competitors. In July, Germany's HeidelbergCement AG bought the Pesenti family's 45% stake in Italcementi for €1.67 billion. In 2014 the Merloni family sold its 60% stake in their manufacturing company Indesit to US rival Whirlpool for €758 million.
De Massi said that Italian family businesses have been struggling to remain in family ownership due to a lack of governmental support. “One reason, which was severely problematic, was the lack of government support in international growth, because Italian markets are going down so they need to go international and high bureaucracy was just killing family business.”
However, De Massis believes foreign acquisitions of many iconic Italian family businesses has been a wake up call for the country. “Acquisitions like Indesit are producing a cultural shock that I believe will provide Italy with the trigger it needs to become more aligned with more successful countries.”
He finished off by saying: “What we need is a partnership between Italian family firms and foreign investors with minority shares, because this will likely help Italian family firms to grow through international expansion.”
Last year the Italian government attracted the ire of foreign minority investors, when it introduced a loyalty shares scheme, that would favour family investors.