• Italy Fund II is on the road with a EUR 350m target, which it hopes to reach by mid-2025
• Currently evaluating targets active in the food and engineering sectors
• Scouting for targets with EUR 5m-EUR 15m EBITDA for EUR 25m-EUR 55m equity investments

Italian private equity (PE) firm Armònia‘s Italy Fund II has two investments in sight for 2024 as the fund continues to take on commitments towards its EUR 350m target, COO Lucia Segni told Mergermarket.

In August 2023, Armònia announced the first EUR 140m closing of the fund, which saw a new cornerstone investor joining together with a bank and a retirement fund, and two entrepreneurs from the first fund, Segni said.

The fund plans to raise its target by mid-2025, she said.

Fund II will have a standard three-to-five-year investment period and is expected to follow in the footsteps of Fund I, as it will be a generalist but with a focus on agri-food, healthcare, industrial technology and products, IT/digital, and tourism and niche sectors, she said.

It will favour companies that implement operating methods that generate a positive environmental and social impact, she said. The vehicle qualifies as an Article 8 product within the SFDR regulation, she said.

Lining up deals

The PE is evaluating targets active in the food and engineering sectors, she said, adding that it is currently conducting the due diligence process on one of these.

Further takeover candidates in the pipeline for 2024 include another food firm and a company active in the industrial technology sector, she said.

Armònia operates in the mid-market space, focusing on segments which are not fully covered by other Italian PE firms, which are usually smaller, or international PE firms, which are usually larger. It typically evaluates groups with EBITDA in the EUR 5m-EUR 15m range, she said, with a typical equity investment of EUR 25m-EUR 55m with room to further support M&A activity.

The firm could also look into larger deals and, in this scenario, Armònia would leverage its co-investment partners, as it did for instance with portfolio company Induplast, in which it co-invested with Azimut Libera Impresa,  she said.

The fund also looks to invest in partnerships with entrepreneurs. It pursues a buy-and-build strategy on its portfolio companies, aimed at improving their internationalisation and competitive positioning, according to an investors’ presentation. It has made a total of 17 add-ons since its establishment, Segni added.

Upcoming exits

In 2022, Armònia completed the deployment of its first fund, Armonia Italy Fund, which held a final close in June 2016 and reached EUR 280m of assets under management, she said.

The PE firm closed eight acquisitions via its first fund, which has made two disposals to date, namely fire safety services company GSA in 2021; and Biodue, which is active in the consumer-pharma industry, in 2023.

Armònia will evaluate further exits this year, she noted. Italian packaging group Induplast, which is currently evaluating strategic acquisitions in its space, could come to market in the coming months, as could Italian technical-fabrics producer Gruppo Arrigoni, which is also close to completing a new add-on, as previously reported by this news service.

Induplast has a Likely to Exit* (LTE) score of 56, while Gruppo Arrigoni has a score of 58, according to Mergermarket’s predictive algorithm, with the score for both companies most significantly weighted by recent companies for sale intelligence about each business.

Armònia’s portfolio company Quick Group, an Italian nautical accessories producer also backed by the Fondo Italiano d’Investimento and the Marzucco family, acquired its peers Nemo Industrie in November and Xenta Systems in October 2023.

*Mergermarket’s LTE predictive analytics assign a score to sponsor-backed companies to help track and predict when an exit could occur through M&A, an IPO, a direct listing or a deSPAC transaction.