24th February 2024

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Business Industry and Financial

Inside Mediobanca, The Investment Bank Making Record Profits Taking Italy’s Biggest Brands Public

Since its founding in 1946, Mediobanca has been at the heart of Italy’s economy. In the last decade, it’s done business with at least 10 Italian billionaires tied to companies like Ferrari and Moncler—and now it’s touting its success in its wealth management business.

Over the last decade, the Milan-based investment bank Mediobanca has had a hand in bringing some of Italy’s most iconic companies public, from sports car maker Ferrari to luxury fashion brands Brunello Cucinelli, Ferragamo and Moncler. Last year, it advised the only two Italian companies to price IPOs at more than $1 billion on the Milan stock exchange—probe card manufacturer Technoprobe and electrode maker Industrie De Nora—in public listings that minted two new billionaires. And it helped the billionaire Benetton family and Blackstone close a $56 billion (including debt) buyout and delisting of infrastructure holding company Atlantia in November, the largest take-private transaction of the year—even bigger than Elon Musk’s $44 billion takeover of Twitter.

Altogether, Forbes estimates that Mediobanca has done business with at least 10 Italian billionaires in the past decade, either through working on their IPOs or helping them through mergers and acquisitions.

Some of those deals powered the bank to a record $595 million in net income on $1.8 billion in revenues in the last six months of 2022, a 6% and 14% increase, respectively, from the same period in 2021. A quarter of the revenues came from the bank’s wealth management division, which brought in $3.9 billion in net new money, or new client funds—an area which has grown thanks to Mediobanca’s relationships with entrepreneurs taking their companies public or selling them to private investors.

With a market capitalization of $9 billion, Mediobanca, founded in 1946, is a minnow compared to American behemoths such as JPMorgan Chase (with a $415 billion market cap) and Goldman Sachs ($117 billion market cap.) But when it comes to the lucrative market for public listings, mergers and acquisitions, the Milan-based bank has been punching above its weight. In January 2021, it was one of the advisors to French automaker PSA Group, better known as Peugeot, on its $52 billion merger with Fiat Chrysler to form a new conglomerate called Stellantis. Last September, Mediobanca was the exclusive advisor to Porsche on its $77 billion IPO on the Frankfurt Stock Exchange, the largest public offering in European history.

“Mediobanca is a unique model in private investment banking,” said Alberto Nagel, Mediobanca’s CEO, in the company’s latest earnings call on February 9. “We capture [IPOs and M&As] and we continue to grow in terms of net new money.”

Some of Italy’s richest people are also shareholders in Mediobanca. Delfin, the holding company of the late eyeglasses tycoon Leonardo Del Vecchio (d. July 2022), holds a 19.8% stake in the bank, while cement and publishing billionaire Francesco Gaetano Caltagirone owns 5.6%. Mediolanum Former Prime Minister Silvio Berlusconi—also a billionaire—held a 2% stake in the bank until he sold it in May 2021. (Berlusconi is still an indirect investor through his 30.1% stake in Italian bank Mediolanum, which holds a 3.4% stake in Mediobanca; the billionaire Doris family owns 40.4% of Mediolanum.)

That hasn’t always been positive: Between 2019 and 2022, Del Vecchio and Caltagirone gradually bought more shares in Mediobanca and criticized what they perceived as the bank’s reliance on its 13% stake in Generali—Italy’s largest insurer, where Mediobanca, Delfin and Caltagirone all hold large stakes—for profits. Last year the two moguls mounted an activist shareholder campaign, opposing Mediobanca’s proposal to reappoint Generali’s CEO. The plan failed when Generali’s shareholders voted 55.9% in favor of the outgoing board last April, with only 41.7% backing the proposal led by Caltagirone.

Francesco Milleri, the new chairman of Delfin since Del Vecchio’s death, appeared to put an end to the feud last month. “Delfin remains a long-term investor in Mediobanca,” he said in a February 24 interview with Italian daily Corriere della Sera. “Our investments in Mediobanca and Generali have been excellent, with increased value and generous dividends.” A spokesperson for Mediobanca told Forbes that neither Caltagirone nor Delfin have bought more shares or released any statements on Mediobanca and Generali since Generali’s April 2022 board meeting.

Still, their influence is limited. More than two-thirds of Mediobanca’s shareholders are retail and institutional investors: 16% hail from the U.S., a new area of focus for the bank, where it recently concluded a roadshow in late February. In 2021, it launched a co-investment initiative with asset manager BlackRock’s private equity unit, offering access to investments in privately-owned companies to Mediobanca’s ultra-high-net-worth clients—commonly defined as people with $30 million or more to invest.

That’s a stark contrast from Mediobanca’s early years. The bank was founded in 1946, the same year Italy became a republic and embarked on its recovery from World War II. The founders, Enrico Cuccia and Raffaele Mattioli, had both worked at Italy’s state-owned Banca Commerciale Italiana, a unit of the Italian public holding company established in 1933 to help the country’s businesses recover from the Great Depression. Their goal at Mediobanca was to help rebuild Italy’s economy and provide financing to its largest companies, which were struggling after years of war.

“After World War II there was a clear need to stimulate post-war reconstruction and favor the evolution of an Italian industrial system by linking it to financial markets,” said Nagel in a statement to Forbes. “Mediobanca’s founders thought about a business that could act as a modern corporate and investment bank, with a deep understanding of the needs of [the country’s] industrial sectors and the ability to finance their growth with loans, guide them in raising capital on the market and advise them on mergers and acquisitions.”

Mediobanca went public in 1956 and four years later it launched a lending program called Compass, making it the first bank to offer personal loans to Italian consumers. It also played a central role in Italy’s postwar economic recovery and golden era of growth: Cuccia and Mediobanca helped finance the 1970 merger between Italian tire-making giant Pirelli and Ireland-based Dunlop and the rescue of ailing automaker Fiat in 1972. Mediobanca’s ability to offer financing at favorable rates, plus its cross-shareholdings in some of Italy’s largest industrial groups, gave the bank considerable influence in the Italian economy for decades.

That began to change when Cuccia stepped down as CEO in 1982 and in 1988, when Mediobanca—which was previously majority-owned by the Italian state—was privatized, in a deal that saw three of Italy’s national banks reduce their collective stake to 25%. In the 1990s, Mediobanca helped privatize several of Italy’s largest state-owned companies, including telecoms firm Telecom Italia and energy distributor Enel.

Another turning point came when Nagel took over as CEO in 2003, three years after Cuccia’s death in 2000. “One of Nagel’s ideas was to transition Mediobanca from a model of cross-shareholdings to a specialized bank in which the three divisions—corporate and investment banking, wealth management and consumer finance—work together in synergy,” a spokesperson for Mediobanca told Forbes.

Mediobanca expanded in 2004, opening offices in Paris and later in Moscow, Frankfurt, Madrid, New York and London. The bank then moved into digital retail banking in 2008 with the launch of CheBanca, and in 2016 it set up a private banking unit to manage the wealth of Italy’s richest families and entrepreneurs.

Still, the Italian market can only take Mediobanca so far, with the number of public listings falling by 35% to 32 last year from a record 49 in 2021. The bank also expects large merger and acquisition activity to slow for the rest of 2023, making it all the more important to keep key customers such as Porsche and continue its overseas expansion.

Last year, reports emerged that Lamborghini and Prada were weighing listing on European stock exchanges (Prada’s shares are currently listed in Hong Kong.) With its track record in fast cars and high fashion, Mediobanca could battle it out with its European and American rivals to take a cut of those deals—if they ever happen.