0

ANKARA ▪ ISTANBUL ▪ IZMIR

October 2015

TURKISH-ITALIAN COOPERATION MEETING

1ST FDI ATTRACTION ROADSHOW

THE ITALIAN GOVERNMENT

DELOITTE POINT OF VIEW: ECONOMIC FOOTPRINT AND MARKET OPPORTUNITIES

1

CONTENT OF THE DOCUMENT

• KEY ECONOMICS AND RECENT DEVELOPMENTS

• ITALIAN PRODUCTION SYSTEM AND STRUCTURE

• M&A TRENDS AND RECENT CROSSBORDER TRANSACTIONS

• CONCLUSIONS

2

9%

22%

15%

39%

17%

20%

10%

26%

15%

27% 26%

17%

23%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

USA China Japan Germany UK France Brazil Italy India Russia Canada Australia Spain

ITALIAN ECONOMY

Source: Deloitte Elaboration on EIU and ONU-Comtrade data

Italy is the 8th largest economy in the world, but

with a strong export attitude

Export/GDP Benchmarking

3

ECONOMY IS STARTING TO GROW AGAIN

Source: ISTAT (Italian National Statistic Institute)

83,2 84,2 85,287 85,8

83,6 84,3 84,386,1

89,8

108,8111,2

115,4

110,3

114,1

119,4

114,7116,8

113

118,5

70

80

90

100

110

120

130

Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015

Domestic

Foreign

Industrial orders: Domestic and Foreign

4

80

85

90

95

100

105

110

2014 2015 2016 2017 2018 2019

THE ECONOMIST INTELLIGENCE UNIT AGREES

Source: Economist Intelligence Unit

• A decreasing trend of the Italian public debt, compared to the general increase experienced in the

other major countries, will bring new balance to the competitiveness of Italy.

• Italian Government debt in % of GDP is estimated to decrease from 2014 to 2019 by almost 5

percentage points (pp).

Germany

Italy

Poland

France

Spain

UK

Expected YoY Public Debt/GDP variation

(Index, 2014=100)

Italy is going to see its public debt reduced

5

CONTENT OF THE DOCUMENT

• KEY ECONOMICS AND RECENT DEVELOPMENTS

• ITALIAN PRODUCTION SYSTEM AND STRUCTURE

• M&A TRENDS AND RECENT CROSSBORDER TRANSACTIONS

• CONCLUSIONS

6

revenue between 50 and 500 mln €

revenue over 500 mln €

revenue less 50 mln €

ITALIAN INDUSTRIAL STRUCTURE

Definition of Company

size based on

European Union Law

Type of Co’s Employees Turnover (Million €)

Micro Co’s less than 10 ≤ 2

Small Co’s 10-49 ≤ 10

Medium Co’s 50-249 ≤ 50

Large Co’s more than 250 more than 50

• In Italy 28% of the added value is concentrated in Large Co’s.

• Large Co’s represent 0,1% of Italian enterprises but they are able to

generate almost one third of the Italian added value.

• About 40% of the total added value is generated by SME’s (Small

and Medium Enterprises).

N. of

companies Employees

%

employees

Added Value

(mln €)

% added

value

Micro Co’s 4.185.081 7.657.247 46,6% 229.158 34%

Small Co’s 180.464 3.219.483 19,6% 151.116 22%

Medium Co’s 21.385 2.074.730 12,6% 109.756 16%

Large Co’s 3.583 3.475.332 21,2% 187.202 28%

Total 4.390.513 16.426.791 100,00% 677.232 100%

Focus on 4.940 Large Co’s

Mid-Market (According to Deloitte Italy definition)

About 58% of Large Co’s are companies

with revenues between 50 to 500 mln €

29%

(1,456)

58%

(2,882)

Source: Based on Istat data IPI Research Center - Italian Ministry of Economic Development

12%

(602)

Breakdown of Italian companies by size

7

24%

17%

5%25%

29%

5%

38%

7%

29%

22%

MID-MARKET COMPANIES (turnover: 50- 500 million €)

Source: Deloitte elaboration on Bureau Van Dick data

This chart does not take Public Sector and Financial Services into account.

Companies geographical distribution (%) Turnover sector distribution (%)

Outside doughnut: Mid-Market Companies

Inside doughnut: Large Companies

• About 80% of the companies with a turnover included

between 50 and 500 million € are located in only five

Italian regions.

• Italian Mid-Market Companies specialize in

manufacturing. In terms of total revenues, they equal

the large companies of that industry.

Services

Wholesale,

Retail &

Transportation

Real Estate

Manufacturing

Energy & Resources

Geographical and sector distribution

0,6

0,2

0,2

1,5 3,1

0,1

1,2

1,3

0,2

7,6

37,2

2,6 1,9

11,9

4,7

1,6

12,4

1,9

7,7

8

25%

16%14%

12%

5%

10%

8%

5%4,3%

24%

16% 15%

11%

6%

11%9%

4% 4,6%

Machinery &

Automation

Food & Beverage Metal Products Chemical &

Pharmaceutical

Rubber & Plastic Other

Manufacturing

Textile & Apparel Transport

Equipment

Paper, Lumber &

Forestry

Share of total mid-market manufacturing turnover

Share of total number of manufacturing mid-market companies

MANUFACTURING MID-MARKET COMPANIES

Source: Deloitte elaboration on Bureau Van Dick data

Their Specialization

• Machinery and Industrial Automation is the Italian Mid-Market companies’ strongpoint.

Our companies make the difference with their unparalleled flexibility and customization capabilities.

• Other historical Italian leaderships: Food & Beverage, Metal products.

• Industry to watch: pharmaceutical products and textile.

(turnover: 50-500 million €)

9

Italian specialties

Food

Automotive Furniture

Ships,

Railcars, Planes

Fashion

0%

5%

10%

15%

20%

25%

0 10.000 20.000 30.000 40.000 50.000 60.000 70.000 80.000

Export in 2014 (Million €)

WHERE TO INVEST?

Source: Deloitte elaboration on Istat data

Please note: this chart doesn’t show sectors with negative export growth

To

tal

ex

po

rt g

row

th b

etw

ee

n 2

01

2 a

nd

20

14

Pharmaceutical

Products

Pharmaceuticals industry is growing at stunning rates, machinery

and industrial automation is a long-time Italian leadership.

Machinery and

Industrial Automation

Mature Italian Export Leaders

Great M&A opportunities …

Consumer Business

Industrial

Deloitte main industries:

Up & Coming Exporters

Construction

Materials

10

WHERE TO INVEST? Italian Specialties (1/2)

Source: Deloitte analysis on Istat (ICE) and Amadeus data

Fashion

17,2

17,8

18,5

32972

32376

30662

2012 2013 2014

Export (€Bn)

N° of companies

Top Italian export brands

Food

19,8

20,8

21,5

55203 55100

54691

2012 2013 2014

Export (€Bn)

N° of companies

Top Italian export brands

Automotive

25,1 26,5

27,6

2403

2326 2326

2012 2013 2014

Export (€Bn)

N° of companies

Top Italian export brands

11

WHERE TO INVEST? Italian Specialties (2/2)

Source: Deloitte analysis on Istat (ICE) and Amadeus data

Furniture

8,2

8,4

8,6

18883

19332

18773

2012 2013 2014

Export (€Bn)

N° of companies

Top Italian export brands

Construction materials

8,9

9,3 9,5

2012 2013 2014

Export (€Bn)

N° of companies

Top Italian export brands

Ships, Railcars & Planes

11,2 10,7

12,3

2764

2638

2486

2012 2013 2014

Export (€Bn)

N° of companies

Top Italian export brands

12

WHERE TO INVEST? Up&Coming Exporters

Source: Deloitte analysis on Istat (ICE), Eurostat and Amadeus data

Pharmaceutical Products

Top Italian export brands

Machinery and Industrial

Automation

70,4

71,6

74,2

24684

23685 23617

2012 2013 2014

Export (€Bn)

N° of companies

Top Italian export brands

Smigroup

17,2

19,6

20,7

513

464 464

2012 2013 2014

Export (€Bn)

N° of companies

Mature Export Leaders

13

CONTENT OF THE DOCUMENT

• KEY ECONOMICS AND RECENT DEVELOPMENTS

• ITALIAN PRODUCTION SYSTEM AND STRUCTURE

• M&A TRENDS AND RECENT CROSSBORDER TRANSACTIONS

• CONCLUSIONS

14

M&A IN ITALY

Source: Mergermarket and Deloitte analysis

Note: 6m 2015 data not yet closed and therefore fully comparable with the previous full year results

Italian M&A trends (volume and value)

In 2014 the M&A activity in Italy has recorded 543 deals closed, with an increase of about 43% on

previous year (2013 – 381 deals).

2015 seems to be a promising year: in the first 6 months, 215 deals were closed 2015 seems to be a promising year: in the first 6 months, 215 deals were closed

417

457 467 459

495

197

279

329 340

381

543

215

29

120

100

148

56

34

20

28

26 31

50

29

0

100

200

300

400

500

600

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 6m2015

Number of Deals Deal value € billion

417

457 467 459

495

197

279

329 340

381

543

215

29

120

100

148

56

34

20

28

26 31

50

29

0

100

200

300

400

500

600

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 6m2015

Number of Deals Deal value € billion

417

457 467 459

495

197

279

329 340

381

543

215

29

120

100

148

56

34

20

28

26 31

50

29

0

100

200

300

400

500

600

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 6m2015

Number of Deals Deal value € billion

15

M&A IN ITALY

Source: Mergermarket and Deloitte analysis

• The overall trend 2011-2014 underlines that, excluding deals with undisclosed value, the average

size of the investments (deal value) is positioned in the range below €100m (small size).

• Large deals (deal value >1.000m) represent a small portion of the M&A activity: in 2014 they

accounted for about 2% of total deals.

280 302

331

478

4534

41

54

44

9

11

0

100

200

300

400

500

600

2011 2012 2013 2014

Num

ber

of D

eals

> €1.000m

€100m - €1.000m

< €100m

Deal volume trend split by size Number

of deals

280 302

331

478

4534

41

54

44

9

11

0

100

200

300

400

500

600

2011 2012 2013 2014

Nu

mb

er

of D

eals

> €1.000m

€100m - €1.000m

< €100m

16

M&A IN ITALY

Source: Deloitte analysis

Italian M&A sector volume (2014)

• 543 deals closed in 2014,

investment value of about €50

billion.

• Consumer markets represents the

most targeted industry (32% of total

deals by volume) accounting for

about €10 billion.

Energy & Utilities 9%

Financial Services 10%

Consumer Markets 32%

Industrial Markets 27%

Technology Media &

Telecomm 15%

Support Services &

Infrastructure7%

Domestic and cross border deal

volume (2014)

• 290 cross border deals closed in

2014, representing 53% of the total.

• In 2014 the number of inbound

deals increased by a strong 90%,

compared to 2013.

Cross border -

Outbound16%

Cross border -Inbound

37%

Domestic47%

Investor type volume (2014)

• PE deals closed in 2014 are 83

(+26% compared to 2013), with a

total investment value of about

€1,8 billion.

PE 15%

Financial 8%

Stock market 6%

Private 3%

Industrial67%

Deals split by industry, geography and investor type

17

INVESTOR EXPECTATIONS

Source: Deloitte Italian Private Equity Confidence Survey

• Every semester, Deloitte Financial Advisory Services publishes the “Italian Private Equity Confidence Survey”, a

survey addressed to Private Equity and Venture Capital operators aimed at understanding trends and expectations

about their activities.

• According to the recent survey for the 2nd semester 2015, 55,9% of the respondents believe that the number of

deals will probably increase, increasing from 45% of the 1st semester 2015; 41,2% expects that the number of

deals will remain stable, while the remaining 2,9% forecasts a decrease in the number of deals.

10,3%14,6%

50,0%55,0%

45,0%

55,9%

87,2%

73,2%

42,5% 42,5%

55,0%

41,2%

2,6%

12,2% 7,5%

2,5% 0,0%

2,9%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1S 2013 2S 2013 1S 2014 2S 2014 1S 2015 2S 2015

Increases

Remains stable

Decreases

Forecast on PE/VC activities in 2015

Deloitte Italian Private Equity Confidence Survey (1/2)

18

INVESTOR EXPECTATIONS

Source: Deloitte Italian Private Equity Confidence Survey

• According to the survey,

preferred sector in which

PE/VC firms are expected

to invest during next

semester is

manufacturing (29% of

interviewed).

• 10,1% of total PE/VC

interviewed have selected

as suitable industry for

future investments

Chemical sector, Luxury

and Industrial products.

• High interest is also

shown in Automotive

(7,2%), Non Financial

Services (7,2%) and in

Packaging and Retail

sector (both 5,8%).

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Deloitte Italian Private Equity Confidence Survey (2/2)

19

RECENT CROSS-BORDER TRANSACTIONS

Source: Mergermarket and Deloitte analysis

From to

Date Target Company Sector Bidder Company Bidder Country Seller Company Seller Country Deal Value €m

July '14

Oltan Gida Maddeleri

Ihracat Ithalat Ve Ticaret

Ltd Sti

Hazelnut production and export Ferrero SpA Italy - Turkey n.a.

March '14 Termo Makina A.S. Manufacturing heavy machines and large components

Danieli & C.

Officine

Meccaniche SpA

Italy - Turkey n.a.

January '14ILMAK Makine Sanayi ve

Ticaret A.Ş. (50% Stake)

Manufacturing of packaging products and systems for

food and other products

Cuki Cofresco

S.p.A.Italy - Turkey n.a.

January '14

Polmot Makina Sanayi ve

Ticaret Motor Ltd. Sti

(50% Stake)

Manufacturing of submersible borehole motors and

pumpsCaprari S.p.A. Italy - Turkey n.a.

August '13Rultrans Transmisyon

A.S.

Distributing and producing of power transmissionand

polyurethane conveyor beltsMegadyne SpA Italy Cukurel Family Turkey n.a.

July '13Callus Bilgi ve Iletisim

Hizmetleri A.S. Call center Comdata S.p.A. Italy Koc Holding AS Turkey 30

March '13Wallmerk Yapı

Kimyasallari A.S.Construction materials and chemicals Mapei S.p.A. Italy - Turkey 12

December

'12

Finar Enformasyon

Derecelendirme ve

Danismanlik Hizmetleri

A.S.; Dun & Bradstreet

Bilgi ve Danismanlik A.S.

Online sources of business information; consulting

services and software products for small scale financial

institutions, banks, industrial, and commercial companies

CRIF SpA ItalyD&B South Asia

Middle East Ltd.Turkey n.a.

July '12

Stelliferi Fındık ve Gıda

Sanayi; Stelliferi & Itavex

S.P.A.

Nuts processing and producer and seller of hazelnuts Ferrero SpA ItalyIF-Mariano

Stelliferi S.P.A.Turkey 64

July '11 Dr. F. Frik Ilac A.S. Pharmaceutical Recordati SpA ItalyIS Private Equity

Investment TrustTurkey 89

April '11Mondial A.S (92.85%

Stake) Site establishment and construction services Astaldi SpA Italy - Turkey n.a.

March '11Yeni Elektrik Uretim A.S.

(40% Stake)Construction and operation of natural gas plants

Ansaldo Energia

S.p.A.Italy Unit Group Turkey 86

20

RECENT CROSS-BORDER TRANSACTIONS

Source: Mergermarket and Deloitte analysis

From to

Date Target Company Sector Bidder Company Bidder Country Seller Company Seller Country Deal Value €m

June '14Trafilerie Brambilla

S.p.A.Steel wire production

Celik Halat ve Tel

Sanayi A.S.Turkey - Italy n.a.

May '14Terminal del Golfo

S.p.A. (50% Stake)

Multi purpose port

terminalArkas Holding S.A Turkey - Italy 107

November

'13

Carbostent &

Implantable Devices

S.p.a

Developement and

distribution of medical

technology devices

Alvimedica Medical

DevicesTurkey - Italy 50

July '13 Pernigotti s.p.a. Chocolate production Toksoz Holding Turkey Fratelli Averna SpA Italy 37

June '13Rondine S.p.A. (50%

Stake)

Production and

distribution of tiles

Celik Halat ve Tel

Sanayi A.S.Turkey

Progressio SGR

SpAItaly 65,0

December

'12

Acropolis S.p.A (51%

Stake)

Prestigious property

used for tourist

activities

Dogus Holding A.S. Turkey - Italy n.a.

March '12Lumberjack (3A

Antonini S.p.A.)Casual footwear

Ziylan Magazacılık ve

Pazarlama A.S.Turkey - Italy n.a.

July '11Industrie Fincuoghi

S.p.A.

Ceramic tile

manufacturerKale Grubu Turkey - Italy 76,0

February

'11Nuroll SpA

Manufacturing of bi-

oriented polyester

films

Polinas Plastik

Sanayi ve Ticaret

A.S.

TurkeyM&G Finanziaria

s.r.lItaly n.a.

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CONTENT OF THE DOCUMENT

• KEY ECONOMICS AND RECENT DEVELOPMENTS

• ITALIAN PRODUCTION SYSTEM AND STRUCTURE

• M&A TRENDS AND RECENT CROSSBORDER TRANSACTIONS

• CONCLUSIONS

22

• Opportunity to have a good connection

to new markets

• Interest in Italian excellence industries

• High level of import from Italy of

products from the main industries (e.g.

industrial machineries)

• Companies and Government are open

to search for international

opportunities

CONCLUSIONS

• Strategic geographic position:

synergies to hit new markets

• Italian economy started to grow

again

• Government has actuated reforms to

facilitate foreign investments

• Attractive industries (Made in Italy

excellences)

• Plenty of small-medium sized

enterprises

• Several successful M&A deals

closed

ITALY TURKEY

23

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Member of Deloitte Touche Tohmatsu Limited

Elio Milantoni

Partner | Head of Corporate Finance Advisory

Deloitte Financial Advisory S.r.l.

Via Tortona 25, Milano, 20144, Italy

Tel/Direct: +39 02 83325066

emilantoni@deloitte.it | www.deloitte.it

24

1ST FDI ATTRACTION ROADSHOW

THE ITALIAN GOVERNMENT