Italy's golden power temporarily cuts M&A in key sectors
A Banca d'Italia study finds that Italy's 'golden power' regulation temporarily reduced M&A activity in strategic non-financial sectors. Approximately 350 M&A operations were missing between 2020 and 2022 in affected industries.
Golden power's expanding reach
Italy introduced 'golden power' in 2012, operational from October 2014, allowing the government to examine and limit corporate operations in strategic sectors.
This framework expanded significantly in 2020, driven by global shocks like the pandemic and geopolitical tensions.
While intended to protect public interest, the regulation introduces regulatory uncertainty and administrative burdens, potentially deterring investments.
The study reveals a marked increase in notifications to the government since 2020.
Sectors subject to notification now account for 16 percent of non-financial, non-agricultural private employment.
However, the actual exercise of these powers (vetoes or conditions) has not increased proportionally to the rise in notifications.
The most affected sectors, where powers were actively used, represent about 6 percent of employment and are among the economy's most productive and innovative.
Uncertainty's M&A toll
The research quantifies the impact of 'golden power' on mergers and acquisitions (M&A) using a new firm-level database.
Results show heterogeneous effects: M&A activity remained largely unchanged in sectors rarely subject to intervention.
However, it temporarily decreased between 2021 and 2022 in sectors where the special powers were actively exercised.
In these key sectors, an estimated 350 M&A operations were "missing" since 2020, predominantly in manufacturing.
The negative impact was statistically significant in 2021-22, a period of high uncertainty regarding the regulation's scope and application.
This effect disappeared from 2023, suggesting reduced investor uncertainty and a normalization of M&A activity.
A necessary double-edged sword
The study confirms that while 'golden power' is a legitimate tool for national security, its broad application initially created significant market friction.
The temporary nature of the M&A slowdown suggests that clarity in administrative practice is crucial to mitigate unintended economic costs.
Policymakers must balance strategic protection with the need to foster a dynamic and competitive private sector.