Healthcare M&A 2024 Comparisons

The current healthcare M&A market in Italy is extremely active. After a general increase in healthcare M&A deals following the COVID-19 pandemic, in the last 12 months such deals have further increased compared to the previous year. Investors are attracted by the potential of the Italian healthcare market, in particular by small-medium size enterprises (SMEs) (especially operating in medical devices, diagnostic, medical laboratories and scientific research sectors) that currently represent a good target for investors. The companies operating in Italy in the healthcare sector are very attractive for investors thanks to the high quality of health and research services provided by them.

During 2023, despite the effects of the COVID-19 pandemic, the inflationary trends, the changes in the financing market and the war in Ukraine, the global healthcare M&A market (including the Italian market) proved to be resilient.

In particular, the COVID-19 pandemic showed how the healthcare market can be profitable, turning the spotlight on the healthcare industry and creating an increase of investments in research and healthcare services.

A key trend in Italy in 2022–2023 relating to the healthcare M&A market was the interest of key market players (Italian and foreign) in carrying out acquisitions in order to consolidate their position, especially in the hospital, pharmaceutical, research and medical devices sectors, therefore increasing their business, the number of services offered and more in general their presence in Italy.

Another trend was the increased interest of private equity funds in the Italian healthcare sector acquiring SMEs in pharmacies, diagnostic centres and laboratories, dental, private and veterinary clinics with the aim of creating business chains which are also developed through economy of scale.

Start-up companies may easily be incorporated in Italy.

Incorporation of a new company does not take a long time; usually less than 20 days.

Depending on the type of newly incorporated company, there can be some initial capital requirements. Incorporation of the limited liability company (società a responsabilità limitata, so-called “Srl”) requires an initial minimum corporate capital equal to EUR10,000 (if lower, specific rules would apply). Incorporation of the joint-stock company (società per azioni, so-called “SpA”) requires an initial minimum corporate capital equal to EUR50,000.

Entrepreneurs may be advised to choose a specific type of entity depending on a number of criteria and needs, including the number of partners/shareholders, the liability regime, the type of business run by the entity to be incorporated, the governance rules, the intention to run the company public, as well as the tax assessments.

Among the different types of companies limited by shares (società di capitali) – which are in principle characterised by the so-called “perfect asset autonomy” (ie, separation between the assets/liabilities of the shareholders and the assets/liabilities of the company) – entrepreneurs may be advised to incorporate a joint-stock company (società per azioni) for a number of reasons, including in the case they are seeking to raise capital also through public offering of shares or bonds. On the other hand, choosing to incorporate a limited liability company (società a responsabilità limitata) may be preferable for SMEs, since the minimum corporate capital required is lower (as mentioned) and governance rules are usually more flexible than joint-stock companies’ rules.

Partnerships (società di persone), instead, are characterised by the so-called “imperfect asset autonomy” (ie, partners may be liable for the company’s obligations with their own assets). For this reason, partnerships (società di persone) are less common than companies limited by shares.

In the current Italian start-up context, there are several players involved in early-stage financing, in line with the European average.

In this segment, VC funds and Italian university spin-offs play a key role.

Universities (especially based in Milan, Turin, Bologna, and Rome) are key sources of start-up’s founders in Italy, since they have launched dedicated programmes to bridge the gap between academic learning and practical entrepreneurial skills. These include accelerators and incubators for early-stage start-ups, along with networking events, hackathons, and pitch competitions to connect entrepreneurs with professionals and investors.

Early-stage financing is provided by (i) Italian VC funds, which represent the majority, (ii) accelerators (roughly 25%), (iii) crowdfunding (roughly 4%), (iv) family offices (roughly 3%), (v) corporate VC (roughly 3%) and (vi) angel investors (roughly 2%); this scenario highlights that the presence of investors under points (v) and (vi) is substantially limited (in particular, if compared to the European average).

Moreover, the Italian government provides support to the venture capital and start-up sector, through various agencies and initiatives; in particular, CDP Venture Capital (Cassa Depositi e Prestiti Venture Capital), a state-owned financial institution, plays a crucial role in supporting economic development and investing in innovation; while Invitalia, an Italian government agency, offers financial incentives and equity support to start-ups.

From a geographic perspective, Italian investors are the backbone of the domestic venture capital scene, with a presence of roughly 70% across 2023 funding rounds, while European and North American investors are increasingly participating in later stages.

The main documentation is represented by investment agreements or term-sheets regulating round of capital increase or SAFE (ie, subscription agreement for future equity) or financial injections to be converted into equity at a later stage.

In recent years, Italy has taken steps to create a favourable regulatory environment for VC funds and start-ups, providing tax incentives, public (national and regional) support programmes and a favourable regulatory framework. Italy has several VC associations and organisations that work to promote and support the VC industry, such as AIFI (Italian Private Equity, Venture Capital, and Private Debt Association), representing the interests of VC and private equity firms in Italy, and Italian Tech Alliance, supporting the tech sector and VC for innovation, as well as programmes sponsored by the Italian government.

Funding to start-up systems comes from different sources that are mainly based in Italy; however, the change in the national scenario might soon attract more venture capital from LPs (limited partners) such as pension funds and endowments based in foreign countries. Moreover, through certain programmes addressed to start-ups, the European Investment Fund (EIF) provides guarantees and microfinance in support of SMEs all over Europe, including Italy.

Italian VC associations and organisations, along with Italian primary advisers, have developed some standard/template documentation to support start-ups and investors, such as SAFE (ie, subscription agreement for future equity), which have been aligned to the Italian environment on the basis of the international (mostly European and US) experiences and market practice.

At the same time, institutional players have defined their own standard/template to be used in every single transaction to speed up the process.

However, most of the transactions in this sector are still based on tailor-made documentation drafted by advisers assisting the start-ups, on one side, or the investors, on the other, taking into consideration the diversity of features and interests involved in each specific deal.

The increase of VC transactions has led to a proportional increase of standard documents/templates that collaborate to create well-developed precedents that might ease future transactions.

Under Italian law, a company established as a joint-stock company, a limited liability company, or a co-operative, whose incorporation dates back no more than five years and which meets certain requirements, could be enrolled as an “Innovative Start-Up” and the company and its investors can be granted specific benefits and incentives.

Following the fifth anniversary from incorporation, if the company maintains specific requirements, it could be enrolled as an “Innovative SME”, with relevant benefits and incentives, provided that the company still has the form of joint-stock company, limited liability company or co-operative.

For the above reasons, start-ups usually maintain one of the above corporate forms over the years.

In relation to the jurisdiction, in order to benefit from the above status, the company should have registered offices in Italy, or in another country of the European Economic Area but should have, in any case, a production site or branch in Italy.

When investors in a start-up in Italy are looking for a liquidity event, on the basis of prevailing market practice, the sale process is more frequent than an IPO. However, clauses concerning IPO processes and relevant mechanisms are frequently provided in the agreements regulating investments in start-ups.

The exit process may entail (i) a dual track, or (ii) a prior attempt of an IPO and, if this process is not completed, the initiation of a tentative sale process. In any case, the IPO of a start-up would be more feasible on a multilateral trading facility such as Euronext Growth Milan, rather than on a regulated market.

If a company decides to list, it may decide to start the process on the Italian market (or multilateral trading facility), as well as on a foreign trading exchange.

The home country exchange is generally preferred by SMEs considering that their investors, clients, suppliers, financial providers and stakeholders are mostly Italian.

However, in the case of companies specialised in healthcare services that are more developed in certain foreign countries, one of these countries could be the first choice if the company aims to start a listing process.

Under Italian law, certain procedures/mechanisms concerning the tender offer over an Italian company (including, by way of example, squeeze-out procedure, sell-out procedure, obligations to launch an MTO or consideration of the tender offer) are regulated by the laws of the trading country.

Therefore, in the case the company is listed on a foreign market and the applicable rules of such market do not include a squeeze-out procedure or similar mechanism, the feasibility of a successful future sale might be affected. Moreover, some jurisdictions provide for a strong multiple vote that might allow the founders to keep the substantial control of the company even with a minority stake.

In the case sale of a company is chosen as a liquidity event, the sale process can be run either as an auction or as a bilateral negotiation with a chosen buyer.

In the healthcare M&A market, given that operators in the market are usually well-known and aware of each other, even in the case the sale process is run as an auction, it is customary to have direct discussions/relationships with the potential buyers.

With reference to the transaction structure, for a sale of a privately held healthcare company in Italy that has a number of VC investors, sale of the entire company or sale of a controlling interest in the company are both feasible and customary structures. The decision concerning the structure of the transaction depends on numerous factors, including the status of the target company. When the target company is in its early stages with reference to its operations/growth, the VC funds might be typically interested in continuing to stay as shareholders of the company.

In Italy, healthcare M&A transactions are mostly carried out as a sale of the entire company for cash rather than a stock-for-stock transaction.

Sale for cash transactions provide seller/s with immediate liquidity, and the preference for this kind of transaction, rather than stock-for-stock transactions, can be deemed as a consequence of the structure of the Italian healthcare market, which is mostly composed of SMEs whose capital is often held by a few individuals and/or entities who may be interested in liquidating their entire investment.

The above being said, M&A healthcare transactions can also be carried out as stock-for-stock transactions.

Founders and VC investors are usually expected to stand behind representations and warranties after closing the transaction. Representations and warranties usually cover a number of matters, such as ownership, corporate and financial books, receivables and liabilities, assets, contracts, privacy, IP matters, proceedings, tax, employee matters, environmental and insurance.

Such representations and warranties are provided together with related indemnification mechanisms, usually under certain limitations (eg, temporary limitations, as well as monetary limitations such as so-called de-minimis, basket and cap), which may be different depending on the matter covered by the representation and warranties.

It is quite customary to provide for escrow mechanisms or W&I insurance policies in connection with the indemnification obligations arising from the representations and warranties. In particular, the application of W&I insurance policies in M&A transactions is growing, also due to the fact that, as a result of the development of the insurance market, the scope covered by such insurance policies is increasing (eg, anti-corruption matters and environmental matters are now covered by policies, unlike in the past).

In the Italian healthcare industry, spin-off transactions are quite customary, since they are considered as strategic transactions aimed at focusing on core business by segregating distinct business segments and, in this way, improving efficiency.

This approach mirrors global trends in healthcare, where optimising portfolios by segregating distinct business segments is crucial for high competitiveness.

Spin-off transactions are specifically regulated for universities, which may establish ad hoc companies (spin-offs) focused on research, whose capital is owned by the same universities, professors and researchers, as well as by third-party investors.

Spin-off transactions in Italy can be structured as a tax-free transaction both at corporate level and shareholders’ level.

The most common way to structure transactions as tax-free is through a demerger, which is in principle neutral from a tax perspective. Such tax neutrality – which also implies negligible indirect taxes and no application of VAT – applies both to the shareholders and the target company.

There are no specific requirements to carry out a tax-free spin-off in the form of a demerger, other than certain corporate formalities to be complied with as set out by the Italian Civil Code.

Recently, a new type of demerger has been introduced in Italy – ie, so-called “demerger by separation” (scissione con scorporo), which allows the assigning of shares of the beneficiary company to the demerged company (rather than to its shareholders). However, no specific tax legislation regulating such type of demerger has been approved yet.

Another way to perform a spin-off as a tax-free transaction is through a going-concern contribution. The effects of such transaction are similar to those described above for the demerger (ie, tax neutrality).

In Italy, spin-off transactions can be immediately followed by a business combination (such as, for instance, transfer of shareholdings in the beneficiary of the spin-off).

In particular, a demerger under which a going-concern (or branch of going-concern) is assigned to the beneficiary company, may be followed by a share purchase transaction over the shares of the same beneficiary company, and the entire transaction would be in principle deemed lawful and not abusive from a tax perspective.

Unlike the above, in the event the demerger involves the assignment of individual assets (rather than a going-concern or branch of going-concern) to the beneficiary company, if such demerger is followed by a business combination such as sale and purchase of shareholdings in the beneficiary company, then the transaction can be deemed as abusive by the Tax Authority since it is in breach of the taxation applicable to direct transfer of individual assets. In such case, the risk would be the requalification of the entire transaction.

With reference to the timing for a spin-off transaction, the demerger process includes respecting corporate timings and deadlines. For instance, following approval (and registration with the competent Register of Companies) of the relevant demerger documentation by the competent corporate bodies of the companies involved in the demerger, a 60-day opposition term is provided in favour of creditors, who may raise objections to the demerger within that period. However, upon occurrence of certain circumstances, the term can be shortened or avoided (such as the prior consent of all creditors to the demerger) and/or the opposition of certain creditors can be overcome (eg, those creditors are paid or guaranteed). Trade unions in certain cases must be consulted and a discussion period should run prior to completing the demerger. All in all, a demerger usually takes from 90 to 120 days.

From a tax perspective, it is not necessary to obtain any ruling from the Tax Authority in order to proceed and complete the demerger. Nevertheless, should the demerger transaction be particularly complex, it is advisable to submit an “anti-abusive” query to the Tax Authority, describing the transaction and requesting the Tax Authority to issue a favourable ruling on the transaction. Such ruling shall be issued within the following 90 days, however such term can be extended in the event the Tax Authority needs to receive further information/documentation on the transaction.

In Italy, the so-called stake-building strategy implemented prior to a tender offer is a customary practice, since it is aimed at providing the bidder with the opportunity to launch an offer from a better position.

Under Italian law, the acquisition shall be disclosed to CONSOB (ie, the Italian Securities and Exchange Commission) and the market, within four trading days, in the case the acquired stake consisting of shares represent more than 3% (or 5% in case the company is a SME) of the target’s corporate capital.

Further disclosure is required if the relevant stake reaches, exceeds, or decreases below, the thresholds equal to 5%, 10%, 15%, 20%, 25%, 30%, 50%, 66.6% and 90% of the target’s corporate capital. Similar disclosure is required in the event the acquisition consists of financial instruments or aggregate shareholding (ie, shares plus financial instruments) reaching at least 5% of the target’s corporate capital.

Moreover, in the case the buyer would acquire a stake consisting of shares, financial instruments, or aggregate shareholding, reaching at least 10% of the target’s corporate capital, it shall (i) fulfil the disclosure obligation above, and (ii) disclose its intentions for the six months following the acquisition, providing specific details concerning:

• financing sources;
• the buyer’s intention relating to further acquisitions of the target’s shares and its intention of acquiring the target’s control and, where necessary, its business strategy; and
• the buyer’s intention relating to the shareholders’ agreement and target’s board of directors.

In Italy, different mandatory offer thresholds are provided. In the case of purchase of a stake higher than 30% of the corporate capital and/or voting rights of a public company, a mandatory tender offer shall be launched; however, this threshold is equal to (i) 25%, in the case there is no shareholder holding a higher shareholding in a non-SME, or (ii) a threshold between 25% and 40% in an SME if so provided by the target’s corporate by-laws.

In addition, a further obligation to launch a mandatory offer shall apply in the event of acquisition of a stake equal to 5% of the corporate capital in a 12-month period by a shareholder that already owns between 30% and 45% of the company’s corporate capital.

The most typical transaction structure for an acquisition of a public company in Italy is a tender offer.

In particular, a voluntary tender offer allows the bidder to (i) freely determine the offer price, and (ii) include certain conditions precedent in the offer, such as the obtainment of a certain percentage stake in the target company as an effect of the offer.

As to typical transaction structures for an acquisition of a public company in Italy, the reverse merger of a listed company into a non-listed company is a possibility; however, these transactions shall be implemented following the favourable vote of at least 66.7% of the voting rights of the listed company and shall trigger cash exit rights for the shareholders who do not vote in favour of such resolution.

The acquisition of public companies is commonly structured as a cash transaction, especially in the case of tender/takeover offers, rather than as a stock-for-stock transaction; however, stock-for-stock transactions are allowed, also in the context of a tender/takeover offer.

As for merger transactions, the “exchange consideration” is usually represented by stocks of the incorporating entity, however, even if it is not very common, it is possible to provide a cash adjustment.

The price of a tender offer is defined according to certain mechanisms provided under Italian law and the Italian Securities and Exchange Commission (CONSOB) regulations that shall be assessed case by case, on the basis of the market price or the latest acquisition of shares of the target carried out by the buyer.

With reference to takeover offers, conditions are allowed exclusively in the case of a voluntary tender offer, therefore a mandatory tender offer cannot be subject to any conditions precedent. Indeed, a voluntary tender offer lapses if conditions precedent are not met or waived by the end of the offer acceptance period.

The customary conditions precedent are represented by minimum thresholds that the buyer intends to achieve in order to delist the company; however, some tender offers might provide certain further and customary conditions (such as, by way of example, change of control, MAC, obtainment of regulatory authorisations such as antitrust and foreign direct investment, etc).

In Italy, it is not customary to enter into transaction agreements in connection with the takeover offer or business combination where a public company is the target.

It is also not customary for a public company to give representations and warranties in this kind of transaction.

By placing a minimum threshold as condition precedent in the voluntary tender offer, the buyer can be sure that it will be obligated to acquire the target’s shares only if the desired minimum amount has been tendered.

In Italy, key thresholds to acquire control are the following:

• although the target would remain listed, 50%+1 share represents the threshold to control the target’s ordinary general meeting;
• although the target would remain listed, 66.67% represents the threshold to control the target’s extraordinary general meeting;
• more than 90% represents the delisting threshold; and
• 95% represents the squeeze-out threshold.

The buyer that reaches 95% of the public company’s corporate capital is entitled to squeeze-out the minority shareholders of the target on the basis of the mechanism defined together with CONSOB and Borsa Italiana SpA (ie, the company managing the Italian regulated stock exchange), on the basis of a consideration to be agreed with CONSOB, also taking into account the consideration of the tender offer; on the basis of prevailing market practice, usually the same consideration of the previous tender offer price is applied as the squeeze-out price.

Under Italian law, upon launch of an offer over a public company the buyer is able to pay the entire amount required for the completion of the offer, however “certain funds” (ie, executed financing documents with bank certification) are not expressly required at that stage.

The offer cannot be made conditional on obtaining financing and, therefore, the buyer may require the banks to provide their commitments with respect to the debt portion (if any) prior to the launch. The maximum potential amount to be paid by the buyer for the acquisition of all outstanding shares that are the subject of the offer shall be granted by banks through a so-called cash confirmation letter. In this regard, the “long-form documentation” concerning financing (if any) shall be executed before the issuance of the cash confirmation letter.

Cost cover or break-up fees, or similar protections are not market practice in Italy. Such protection can be provided by the selling shareholder, if any, while the public company target (if involved in the process) may undertake to take any action that, to the maximum extent under applicable law, is required to complete the transaction (such as call the shareholders’ meeting and the board of directors’ meeting).

If a bidder has not obtained 100% ownership of a target as a result of a takeover offer, the shareholders are entitled to enter into a shareholders’ agreement to govern their respective rights and duties.

A shareholders’ agreement may provide for governance rights, profit distribution and relevant protections, as defined among the shareholders. By way of example, a bidder that does not reach a majority shareholding in the company may be provided by the other shareholders with veto rights on certain strategic matters (granting control de facto), as well as with exit rights and liquidation preference protections (to protect its return on investment).

For the sake of completeness, the extract of these shareholders’ agreements shall be disclosed, inter alia, on the issuer’s website.

It is customary for the buyer to enter into irrevocable undertakings with the target’s key shareholders who intend to adhere to the tender offer (in the case of a voluntary tender offer).

However, such irrevocable undertakings may be terminated in the case when any of such shareholders wish to tender their shares in a competing tender offer and, therefore, they are not definitely binding for the shareholders of the public company.

Within 20 calendar days following the disclosure of the notice related to the launch of the offer, the offeror shall file an offer document with CONSOB containing all necessary information in order to allow the investors to acquire a grounded opinion on the offer, including the acceptance form (scheda di adesione). The offer document is based on a template published by CONSOB.

CONSOB shall approve the offer document within 15 calendar days after its filing. However, CONSOB may decide to suspend the above 15-day term should they deem it necessary in order to require further information. Such information shall be provided within the term established by CONSOB, which shall not, however, exceed 15 calendar days. Upon expiration of the deadlines indicated above and failing any decisions by CONSOB, the offer document shall be deemed as approved.

In the case a competitive offer is launched, the offer document concerning the competing offer shall be published no later than five trading days before the final date of the acceptance period of the original offer, and the publication of the offer document can be authorised by CONSOB only after (and, in any case, within five calendar days from) obtaining the applicable clearances.

As a general remark, the duration of the acceptance period of the competitive offer shall be agreed with Borsa Italiana SpA immediately before the approval of the main offer document by CONSOB. Therefore, the competing offeror will be in the position to know the duration of the acceptance period only upon publication of the relevant takeover prospectus and, therefore, significantly after the date of announcement of such takeover.

The publication of the offer document cannot be authorised by CONSOB until the release of regulatory clearance (as Bank of Italy and similar regulatory European authorities).

The clearance processes may also involve other approvals/authorisation from other bodies (eg antitrust, foreign direct investment bodies) and non-European regulatory authorities; such approvals/authorisations shall be obtained before the end of the acceptance period, but these approvals/authorisations do not restrict the launch of the offer.

Starting to operate new companies in the healthcare industry is subject to specific regulations depending on the field of the healthcare industry in which they are intended to operate, including:

• Legislative Decree No 502/1992 for healthcare facilities;
• Legislative Decree No 219/2006 for pharmaceutical products for human use;
• Regulation (EU) 2019/6 and Legislative Decree No 218/2023 for pharmaceutical products for veterinary use;
• Regulations (EU) 2017/745 and 2017/746 and Italian co-ordination legislation for medical devices (ie, Legislative Decrees No 137/2022 and 138/2022); and
• Directive (EU) 2002/46 and Legislative Decree No 169/2004 for food supplements.

The setting up of healthcare facilities is subject to obtaining a construction authorisation and an authorisation to run the business. Private healthcare facilities can also apply for obtaining the accreditation which allows them to provide healthcare services/activities in the name and on behalf of the National Health Service. The volume and types of such services are provided by specific agreements to be negotiated between the private healthcare facilities and local health authorities. In Italy, the procedure and requirements for obtaining authorisations and accreditation may vary from region to region, therefore also the time required to obtain them may be different depending on the region.

Companies operating in the pharmaceutical products sector for human and veterinary use are required to obtain specific authorisations that vary depending on the type of activity (eg, marketing, manufacturing, wholesale distribution, deposit).

The regulatory authorities typically involved in the issuing procedure of the authorisations related to pharmaceutical products for human and veterinary use are, respectively, the Italian Medicines Agency (AIFA) and the Ministry of Health. Wholesale distribution authorisations are issued by the Italian regions. The marketing authorisation is issued with a centralised procedure (ie, intended for validity in all European Countries) that are granted by the European Medicine Agency (EMA) and formalised by the European Commission.

The timing to obtain the necessary pharmaceutical permits depends on the type of requested authorisation (eg, 90 days from the application for manufacturing authorisations; 210 days for marketing authorisations etc).

Companies operating in the manufacturing and distribution of medical devices are required to be registered at the Ministry of Health and on the EUDAMED database (once it is fully operational) before starting their activity.

Companies active in manufacturing and packaging of food supplements are subject to a permit issued by the Regions in form of recognition of the relevant plants prior to site inspection.

The primary securities market regulator in Italy is CONSOB. In respect of M&A transactions between public companies, as soon as a bidder is obliged to (in the case of a mandatory tender offer) or intends to (in the case of a voluntary tender offer) launch a tender offer, it shall disclose its obligation/intention to the market and to CONSOB.

In Italy, restrictions on foreign investments (so-called Golden Powers) are provided by Legislative Decree No 21/2012 and the following Presidential Decrees No 108/2014, No 179/2020 and No 180/2020 (the “FDI Regulation”).

Under the FDI Regulation, M&A transactions shall be notified to the Italian Presidency of the Council of the Ministries, for clearance, whenever they involve companies, also in the healthcare sector, holding assets or carrying out activity deemed strategic by Italian government. Pending the FDI filing, the effectiveness of the transaction is suspended.

Among the assets and activities considered strategic in the healthcare sector, the following are included:

• critical digital technologies functional to the delivery, also remotely, of healthcare services;
• critical technologies aimed at the analysis of data and use of biological knowledge for health and diagnostics, prognostics, therapy and related follow-up;
• critical bioengineering technologies and critical nanotechnologies used in the pharmaceutical and medical devices sector, in diagnostics, prognostics and therapy; and
• strategic activities in the healthcare sector, including supply of medicines, devices and healthcare equipment, and related R&D activities, through the use of the assets and technologies listed above, or carried out by companies having an annual turnover of at least EUR300 million and an average annual number of employees not lower than 250 individuals.

With particular reference to the healthcare sector, the following transactions shall be notified under the FDI Regulation:

• any resolution, deed or transaction carried out by a company holding strategic assets, resulting in change of control, ownership or availability of such strategic assets in favour of any extra-EU or EU (including Italian) entities;
• any acquisition of shares, by any extra-EU or EU (including Italian) entities, resulting in the change of control of a company holding strategic assets; and
• any acquisition of shares, by any extra-EU entity, of at least 10% of share capital or voting rights in companies holding strategic assets, provided that the total investment value is equal to or higher than EUR1 million. Further acquisitions in the same companies resulting in holding more than 15%, 20%, 25% and 50% of the capital shall also be notified.

National security review of acquisitions in Italy is covered by the FDI Regulation.

In addition, specific restrictions against investors/buyers based in Russia are provided by Regulation (EU) 2014/833, recently amended by Regulation (EU) 2024/745, in relation to the sale, supply, transfer, and exportation of a range of technologies and goods, including luxury products such as cosmetics. Such restrictions, however, are not applicable to pharmaceutical products or technologies intended for medical or pharmaceutical purposes.

Regardless of the nationality of the buyer/investor, the exportation to, and importation from, any EU and extra-EU country of certain sensitive products such as narcotics and psychotropic substances, including those used for healthcare purposes, are subject to specific authorisations issued by the Italian Ministry of Health. Moreover, in order to prevent or limit shortage of medicines in the Italian market, the Italian Medicines Agency is entitled to adopt certain temporary restrictions to the exportation in the presence of unavailability risks.

More in general, export control regulations are provided at European level. According to Regulation (EU) 2013/952 laying down the Union Customs Code, any goods to be taken out of the customs territory of the Union, including pharmaceutical products, are subject to customs supervision. Such controls may result, among others, in checks on counterfeit and falsified drugs. In Italy, the authority entrusted with the customs supervision is the Italian Customs Agency, in accordance with the Italian Medicines Agency and Anti-sophistication and health units of the Carabinieri. Restrictions and/or prohibitions on the export/import of the products may be justified by the public health protection needs, as well as by reasons related to industrial and commercial property rights.

With reference to antitrust requirements, a pre-merger filing obligation is triggered when any form of concentration – including the creation of a full-function joint venture – involves a lasting structural change in control – in terms of possibility to exercise decisive influence – over a business and the following thresholds are met: (i) the combined turnover generated in Italy by the undertakings concerned exceeds EUR567 million; and (ii) the turnover generated in Italy by each of at least two undertakings concerned exceeds EUR35 million.

Until six months after closing a transaction, the Italian Competition Authority (ICA) may also require each of the undertakings concerned to notify below-the-threshold concentrations which entail prima facie concrete risks for competition in the domestic market or in a part thereof and meet either of the thresholds above or the following threshold: where the total worldwide turnover generated by all the undertakings concerned exceeds EUR5 billion.

Even though, under Italian competition law, merger notifications have no suspensory effects unless the ICA issues a decision to that effect, it is advisable for the notifying party(ies) to discuss with the Authority the need to proceed to closing before clearance. Moreover, it is also advisable to carry out a pre-notification procedure where there are horizontal overlaps or vertical relationships between the activities carried out by the parties to the transaction.

With reference to the applicability of Italian labour law to M&A transactions, such laws and the national collective labour agreements generally applied in the healthcare sector do not require the provision of previous information or the carrying out of consultation procedures with work councils and unions in the case of share deals.

On the other hand, an information and consultation procedure with work councils and unions is required in the case of asset deals (eg, transfers or spin-offs of a going concern, mergers or demergers, etc). Such information and consultation procedure shall be carried out before the completion of the asset deal and lasts a minimum of 25 days. No veto power or other limitation to the business decision is assigned to work councils and unions. More detailed information and consultation procedures could sometimes be entered into at company level.

There are currently no currency control regulations in Italy, except for certain disclosure requirements imposed by law for the transfer of cash or securities in or out of Italy when the total aggregate amount of such transfers exceeds certain amounts.

Central bank approval/clearance is required for M&A transactions involving and/or having a material impact on regulated financial entities (eg, the acquisition of a qualifying shareholding in or by a bank, a financial intermediary or a payment institution, merger or demerger transactions involving these entities).

For larger banks, the European Central Bank is actively involved on the basis of the rules and the allocation of tasks set forth by the Single Supervisory Mechanism.

In Italy, the most significant legal development in the healthcare sector in the past three years, which also impacted investments in Italy, is the implementation of the payback mechanism related to medical devices purchased by the National Health Service (NHS). This mechanism provides that, in the case public spending in the medical devices sector exceeds certain thresholds – to be certified by ad hoc decrees of the Ministry of Health – the suppliers of medical devices to the NHS shall repay a portion of the “excess” spending (up to 50%) to the Regions according to their own turnover.

This mechanism, formerly introduced by Law Decree No 78/2015, remained substantially unimplemented for many years due to the absence of the ministerial decrees that should certificate the exceeding of the annual expenditure thresholds. The payback mechanism has been implemented only since September 2022, mainly to refinance the NHS after the pandemic; accordingly, suppliers were requested to pay the relevant amounts due for the “excess” spending.

In order to refrain from making the above payments, most suppliers challenged the payback mechanism before the Administrative Court, arguing both procedural flaws and non-compliance with the Italian Constitution and European Law. Approximately 1,900 appeals have been filed with the court.

Due to the high number of appeals, certain significant reductions of the amounts due by the suppliers have been introduced by Italian law, provided that the relevant supplier waived the pending litigation.

Notwithstanding the above, most of the appeals have not been waived. The Administrative Court deemed the arguments related to the non-compliance with the Italian Constitution as grounded, and decided to defer the case to the Constitutional Court.

The decision of the Constitutional Court is expected in the next few months and will likely have a significant impact on the operators of the sector and their future interest in investments in Italy.

Potential buyers of a public company customarily perform an outside-in due diligence process before launching the offer. The public company, in fact, publishes financial and non-financial reports (quarterly and annually) and is bound to issue press releases for certain transactions or events.

In some cases, a possible confirmatory due-diligence (if authorised by the target’s board of directors and subject to execution of specific non-disclosure agreements) can be carried out. In such respect, after completion of the outside-in due diligence, the potential buyer may select certain specific business/financial/legal items that can be assessed in depth and discussed with the management of the target. The board of directors of the target may consider authorising the confirmatory due diligence process in the presence of a corporate interest for all shareholders of the target represented by the maximisation of the value deriving from the tender offer.

In any case, in the event the potential buyer becomes aware of inside information during the confirmatory due diligence, it will be forbidden to make any purchase of the target’s shares until such inside information is publicly disclosed to the entire market, so to ensure the equal treatment of the market participants.

Privacy restrictions and limitations (generally provided for by Italian law and especially those concerning personal data that are typically treated by healthcare companies) apply to due diligence processes involving healthcare companies.

In light of the above, certain general data protection principles should be followed by the potential buyer, seller and target in the context of the due diligence process:

• enter into agreements that govern the process and the sharing and protection of information (non-disclosure agreements, data processing agreements, etc);
• anonymise as much data as possible in order that it is not and cannot be referred to individuals;
• only disclose, collect and/or process personal data that is strictly necessary to the due diligence process (eg, health data is generally not necessary to perform a legal/financial/technical due diligence process; whenever aggregated data may serve the scope of the due diligence, do not collect and share granular information on individuals; whenever aggregation is not possible or would hinder the due diligence process, at least pseudonymise the data shared, etc);
• adopt organisational and technical measures to protect the processed personal data (eg, access to personal data should be granted only to those professionals who have an active role in the due diligence process; virtual data rooms should track the users’ activities over the shared document; more sensitive documents (eg, payrolls of directors and top managers, patients’ data, etc) should not freely circulate outside the virtual data room etc);
• retain the personal data for the time strictly necessary to conclude the due diligence process, with the appropriate security measures; and
• verify that all the data subjects involved have been informed, at least in general terms, of the potential disclosure of their data within an M&A context, or that an exemption to such obligation applies; if neither the information notice nor the exemption exist, vendors and potential buyers should at least have specific contractual warranties in place to address any potential request for damages and/or sanctions connected thereto.

In addition to the above, specific data sharing and/or data processing agreements should be entered into by and between the healthcare company and any potential acquiring party/investor/third party, which should, in turn, involve any consultant who will materially perform the due diligence process on its behalf.

For the sake of completeness, in Italy there is established case law in the healthcare sector requiring buyers of assets containing genetic data (eg, a biobank) to refresh the information to the data subjects and renew their specific and explicit consents as a necessary condition for the change of control over the personal data (and the underlying asset) involved in the transaction.

As soon as the bidder is obliged to (in the case of a mandatory tender offer) or intends to (in the case of a voluntary tender offer) launch a tender offer over a public company, it shall disclose its obligation/intention to the market and to CONSOB by publishing a notice providing certain specific details and information, such as the bidder and person acting in concert with it, the target company, the consideration per share, the reasons for the offer, the conditions precedent (if any, in the context of a voluntary tender offer) and its future plans concerning the company and, in particular, its intention to delist the target.

With reference to prospectus requirements, under Regulation (EU) 1129/2017, a prospectus is not required in the case of a tender offer with consideration consisting of, totally or partially, stocks, provided that a so-called exempted document shall be disclosed providing information concerning the transaction and the issuer.

Moreover, in the case the shares issued in the context of the transaction represent no more than 20% of the corporate capital of the issuer, the exempted document is not required.

The bidder shall produce its own financial statements in the offer document.

Moreover, in the case an exempted document is required in the context of a stock-for-stock takeover, the financial statements are required in accordance with the prospectus regulation. In relation to the form required, under Italian law, the listed company shall adopt the IAS/IFRS form.

With reference to disclosure of transaction documents, the parties shall file the offer document with CONSOB, which will be subsequently approved and, in that case, published; moreover, the parties shall file any shareholders’ agreements that they have executed in connection with the transaction with the Register of Companies, and following with CONSOB.

In a business combination scenario, the duties of the directors provided by general law shall apply (such as the duty to appropriately organise and manage the company, to act within the company’s corporate purpose and for the company’s benefit, to implement the resolutions of the shareholders, to refrain from conflicts of interests and abide by the fiduciary duties, etc). In the case of merger or demerger transactions, directors are required to draft and approve specific documentation (eg, merger or demerger plans, report on the relevant exchange ratio and ad hoc financial statements).

Duties of directors are owed to their company and the company’s shareholders. However, creditors of the company or third parties who have been prejudiced by actions imputable to the company’s directors may have action taken against them (eg, when the mismanagement has caused insolvency or fraudulent or grossly negligent actions have been committed by directors). Recently, as in other EU jurisdictions, the general duty not to cause harm is subject to attempts of extensive interpretation to extend responsibilities of directors to stakeholders (employees, societal communities, etc). The above is also the consequence of recent EU legislation.

The Board of Directors may establish one or more committees and delegate some of its functions to such committees. Specific committees are provided for public companies: remuneration committee, related-party transactions committee, audit committee, etc.

It is quite usual to establish special or ad hoc committees for business combinations to oversee specific aspects of the transaction. Usually, such committees are comprised of directors with appropriate expertise.

The establishment of such special committees may depend on several factors, including, without limitation, complexity of the transaction and conflict of interests among the directors. Indeed, in the latter case, the establishment of an ad hoc committee ensures that conflicts are managed properly, mitigated, and disclosed in accordance with applicable law.

With reference to the board’s role in M&A transactions, the situation is remarkably different depending on the type of business organisation and whether the transaction concerns a public or a private company.

In principle, a private acquisition of assets or shares is led by teams of the private buyer and the private seller, who report to the respective CEOs. Those CEOs then report to the board. The shareholders are not frequently consulted, unless in specific circumstances (the by-laws so provide or the transaction consists of the sale of the whole private company’s going concern).

Instead, mergers and demergers provide for the approval of the shareholders and only in very limited cases such approvals can be avoided.

Public companies have their rules. Their bard includes independent directors and directors elected by minorities. Specific committees are established. Press releases and specific reports are set forth by the law or the corporate governance code or the by-laws. The board is involved in tender offers concerning public companies.

In the context of takeovers or business combinations within the Italian jurisdiction, directors commonly seek independent outside advice to ensure informed decision-making.

Besides the legal adviser appointed for the transaction, entrepreneurs usually appoint financial advisers, which play a crucial role in providing expert guidance throughout the transaction process.

Indeed, financial advisers may provide comprehensive services, including financial analysis, market evaluation and assessments, and strategic recommendations tailored to the specific circumstances of the transaction. Such recommendations guide directors in evaluating the whole transaction and assessing all its financial implications.

In addition, it is customary practice in Italy, for financial advisers to provide a fairness opinion on the transaction, especially for transactions involving significant financial implications.

Such opinion is an independent assessment of whether the terms of the transaction are fair from a financial perspective, and is an important tool for the directors to demonstrate diligence and ensure transparency in decision-making.