Alessandro Danovi


For several reasons, vulture funds have never been popular. While economic literature about venture capital is very articulated, this is not the case with vulture funds. Even in recent years, only a few academic papers have appeared (Hotchkiss & Mooradian, 1997; Rosenberg, 2000; Gilson 2001; Feder & Lagrange, 2002; Altman 2004; Altman & Hotchkiss, 2006; Kutcher & Meitner, 2006 about the German market; Krasoff & O’ Neill, 2006). In mature markets, especially Anglo-Saxon ones, high segmentation and specialization
are normal. For every phase in the life cycle of companies there is a correspondent set of specific investors. Whether in decline or in crisis, it is easy to find investors willing to buy out shares, in order to check the chances for a turnaround or to acquire relevant portions of debts in order to carry out arbitrages of value. The purpose of this paper is to provide a comprehensive overview of turnaround financing in Italy, meaning operations regarding distressed or troubled companies, carried out by professional private equity investors.
Sectorial data show that total investment in turnarounds is on the rise but still amounts to less than 5% of the Italian private equity market. Greater attention, however, seems to be paid by professionals and the media because of the great economic returns expected.
Rare, older works dedicated to the Italian market (Perrini, 1997; Danovi, 2001 and 2003) have shown not only the absence of dedicated operators, but also a general lack of interest for this private equity niche. More recent studies (AIAF 2009) trace the birth and first steps of specialized investment funds. In comparison to the situation surveyed in the past, this study tries to investigate whether there has been an improvement by means of analyzing the answers to a questionnaire submitted to a selected sample of professionals.
A significant change within the sector was expected due to both internal and external factors, a more developed private equity market and the reform of the Italian bankruptcy law in primis. The wider range of solutions offered by the new set of laws, indeed, aims at easing the successful restructuring of distressed companies. However, empirical data highlight only a modest increase in total investment despite a growing interest towards the topic. Furthermore, there is evidence that a few private equity funds, originally set as specific to turnaround, have now diversified their activity to target also more traditional deals. The new legislative framework will probably cause significant, long-term effects; nonetheless, some delicate issues responsible for the slow development of the Italian
market for distressed securities still remain unresolved.

KEY WORDS Vulture funds | turnaround investing.
JEL CLASSIFICATION: G24 - Venture Capital.

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ISSN: 1971-5293

ISSNe: 2283-3374

Esperienze d'Impresa, Reg. Tribunale Salerno n. 875 del 3/11/1993