Companies interested in entering into a merger or acquisition can rely on our corporate lawyers in Italy for complete assistance during the financial transactions, and the most important post-merger steps. Understanding the legal framework governing mergers and acquisitions in Italy (M&A) is an important step before commencing these transactions.
Working with a law firm in Italy that specializes in mergers and acquisitions, such as our local experts, is important not only for meeting the merger legislation and the provisions of the relevant, law-enforcing authorities but also for ensuring a smooth transition and takeover.
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Laws governing corporate mergers and acquisitions in Italy
The Civil Code is one of the main sources of law governing mergers and acquisitions in Italy. It applies in the case of joint stock companies and Italian limited liability companies. Other laws that govern and control corporate mergers and acquisitions include the Italian Antitrust Law, as well as rules interpreted according to or adapted to relevant EU laws and principles.
Our team can assist with complete solutions for an M&A in Italy, as well as with solutions for ongoing legal compliance for foreign and local companies doing business in the country.
Types of corporate acquisitions in Italy
In a corporate acquisition, one company effectively purchases another legal entity. For the purpose discussed herein, a local or a foreign company may decide to purchase an Italian legal entity, be it a private or a public corporation.
Acquisition transactions in Italy may be categorized as:
- share or quota deals,
- asset deals,
- purchase and sale of assets,
- contribution of assets.
Shares and quota deals in acquisition cases in Italy apply mostly to joint stock corporations and limited liability companies. The corporate capital of joint stock corporations is usually represented by share certificates, which will be transferred in front of an Italian public notary or bank officer in case of acquisitions.
The capital of an Italian limited liability company is represented by quotas, which will be transferred before a public notary by signing an agreement. The agreement must be then submitted to the Italian Companies Registrar.
Corporate mergers in Italy
With respect to merger transactions, these may be categorized as mergers and de-mergers in Italy. The structure of the transaction depends on the deal and other tax considerations.
Italian mergers are set out in articles 2501 through 2505 of the Civil Code which establishes two types of mergers:
- by acquisition,
- by incorporation.
Mergers by acquisitions are the cases of a company merging with an existing enterprise with the transfer of all assets and liabilities. Mergers by incorporations are represented by the merger of two or more companies into a newly formed company in Italy.
Article 2506 in the Civil Code also establishes the procedure for de-mergers in Italy. These are represented by the transfer of an Italian company’s assets and liabilities to other previously or newly formed companies. De-mergers may happen without the Italian company’s liquidation or winding up.
Please keep in mind that the legal resources mentioned herein are only briefly outlined. In practice, corporate mergers are governed by a broader set of rules and laws, including relevant European laws to which Italy adheres. One of the key Italian authorities that has control over M&A in Italy is the Italian Competition Authority.
Important issues concerning mergers and acquisitions in Italy
In practice, mergers and acquisitions are two different approaches: while the first relies on combining two existing companies to form a new legal entity, the second refers to the situation in which one company completely absorbs the other (through a takeover).
In some cases, M&A in Italy can also take place through special purchase vehicles, or special purpose acquisition companies.
Working with a team of Italian lawyers, such as our experts, is advisable in both cases. Below, we list some of the most important steps involved in M&A transactions:
- Initial information: the company that is interested in being bought or absorbed expresses this intent in a Memorandum published with the purpose of attracting a suitable buyer;
- Negotiation: this is the stage during which the two companies decide on important matters concerning the governing competition laws, employment law, licensing, and financial matters;
- Due diligence: a key step for any M&A in Italy, it is an essential and comprehensive verification of the company that will be bought/absorbed/merged with;
- Post-closing negotiations and closing: before the two parties finalize the M&A agreement, they can decide to negotiate further on important points; when working with us, our lawyers in Italy are present during all of these steps;
- Implementation: once the transfer is complete, the companies will focus on integrating the changes, and maximizing the way in which the two businesses work together (for mergers).
M&A due diligence
Due diligence, or the verification of the company that will be acquired, is an important step in Italian M&A transactions. This takes place before the execution of the acquisition agreement.
The review areas in Italy remain the same as for other jurisdictions and foreign investors are not asked to verify any additional or specific ones. Nonetheless, we recommend working with our attorneys in Italy if you want to make sure that the verification phase includes all the commonly reviewed areas.
We remind investors that they should verify the following:
- Material contracts;
- Any financing agreements that may have been concluded by the company over the years;
- Corporate documents;
- Employment practices, HR history, as may be relevant for the concerned company;
- Health and safety issues: compliance and any past legal actions that may have taken place in this area (if applicable);
- Intellectual property matters: copyrights, patents, trademarks, and any such IP property that may have been registered in the name of the company;
- Personal data processing matters, including GDPR compliance;
- Environmental compliance and any litigation in this area (if any issues may have occurred over the years);
- Real estate owned by the company: some companies buy property in Italy; due diligence will reveal where these properties are located, when they were purchased, and any other relevant information that may concern the acquiring company.
Matters concerning Competition Law in Italy – detailed upon request by our Italian lawyers – may be relevant in some cases. If the due diligence phase highlights any irregularities, our lawyers in Italy will be able to guide you through the following steps.
In practice, the verification of the areas of interest listed above takes place by reviewing electronic and physical documents. However, in some cases, interviews may also be conducted. These can take place when the buying company has additional questions about certain topics when the documentation is unclear/when the review uncovers certain issues.
Closing the M&A deal
The acquisition agreement will commonly state important closing obligations for the parties. One of these is the anti-trust clearance which is obtained from the Italian Competition Authority.
The review from the Competition Authority is substantive for the completion of the M&A process. Moreover, the process can move forward only if the tax authority issues a certificate stating that there are no debts and unpaid taxes. A condition for closing the M&A deal may be to obtain the needed tax certificate(s) within a specific period (for example, 40 days).
Financing is an essential aspect of the M&A process. If the buyer has not secured the full purchase amount by the time the acquisition agreement is prepared for execution, the deal may reach a standstill.
Lastly, the companies involved in the acquisition or merger may pose certain conditions, such as a special Board approval for some aspects, which left unsatisfied will prevent or delay the closure of the M&A transaction.
If you have questions about the conditions for closing a corporate acquisition phase, our lawyers in Italy can analyze your situation.
M&A activity in Italy
According to a regional outlook reported by KPMG, M&A in Italy continued to present important opportunities and, in fact, perform well when compared to other European markets. Our team summarizes some of the data below:
- M&A deal activity in the country rose by 8% on a year-on-year basis (in 2023 vs. 2022);
- In 2023, the number of deals was upwards of 241;
- Most M&A in Italy took place in the retail sector; Apparel deals amounted to 22% of the total deal volume;
- In one of the biggest deals, a French luxury group acquired a 30% stake in a famous Italian fashion house for approximately EUR 1.7 billion.
Our attorneys in Italy can give you more information about merger and acquisition issues such as seller and buyer rights and duties, the legal aspects of asset deals and those of the share/quota deals, and other relevant law principles. We also assist those who wish to buy a house in Italy.
For details about taxation aspects in cases or mergers and acquisitions, you may contact our attorneys in Italy.