030210 BIt notes 7

The Borsa Italiana study analyses the attitude towards the stock market of Italian companies suitable for listing considering their economic characteristics, strategic and investment plans, ownership structures and the viewpoints of entrepreneurs and managers.

The analysis was conducted with a survey on a representative sample of 1,200 listable companies identified through criteria of size, profitability and ownership structure.

57.8% of the 1,200 listable companies have already thought about listing, coming to various conclusions: 250 companies, equal to 21.6%, have already specified listing among their strategic objectives, whereas 26.1% do not exclude listing while not including it among their short-term objectives. For 10.1%, the result of their reflection was negative.

The remaining 42.2% of the total have not yet thought about the possibility of listing.

A comparison with a similar survey carried out in 1997 shows a marked increase not only in those who have already considered the possibility of listing the company (from 46.0% to 57.8%), but above all in those that have included this possibility in their medium-term strategic plans (from 4.1% to 21.6%).

76.3% of those interviewed agreed that listing can be an opportunity for raising new capital, 50.5% for improving their relations with the banking system, and 41.1% for the return in image generated through the Borsa.

However, the group of companies closest to listing attributes greater value to it in terms of the ability to improve relations with the banking system and reducing the cost of debt: it thus appears to be an alternative choice to other sources of financing, capable of contributing financial rather than industrial or strategic benefits, such as stimulating the introduction of more advanced organisational systems or the restructuring of ownership.

In terms of strategic plans and ownership structure, the listable companies reflect several characteristics of the country's entrepreneurial scenario: this concerns businesses with very concentrated ownership structures (in 70% of the cases, there are less than six shareholders) with a strong role played by the reference family (in 43.1% of the cases, the family owns the entire company and in 84.4%, ownership includes at least one family member).

The strong personal ties between the owners is also revealed in management methods and a limited availability towards expanding ownership: only 43.0% of those interviewed would be prepared to give up a share of ownership in order to take advantage of growth opportunities and only 39.5% declare the ownership's willingness to change their role within the company.

These companies display a tendency to be "one-way" in their strategies: the characteristics and the range of products and services are deemed to constitute the main areas of strength towards the competition; for nearly two-thirds of businesses, the principal strategic challenges in their own sectors are concentrated in the growing competition on existing products. This results in priority development projects which, for 71.0% of companies, consist of increasing market share for current business. Diversification of the business by entering into new areas or new geographic markets was mentioned respectively by 41.5% and 51.0% of those interviewed and only 34.0% intend to implement external growth processes through mergers or acquisitions.

In a context little inclined to flank core business with innovative strategic policies based on finding outside resources, the requirements of more complex financial instruments become more burdensome. For the relevant costs and the capillary impact it has on the management methods of businesses, listing can only be implemented economically and conveniently in correspondence with medium-term investment plans having high innovation content.

Thinking about listing is more frequent in companies that, within a well-defined entrepreneurial plan, have already begun to establish a more advanced and efficient management organisation that is even closer to the needs of investors. For these companies, listing is seen as less complex because they have already overcome the first "psychological hurdle" towards the market. In the second place, interest in the market is more frequent in companies with more aggressive growth strategies, testifying to the fact that listing can support medium-term growth projects.

On the other hand, the actual decision for listing is positively influenced by the presence of financial partners within the shareholder group, who help facilitate the transition phase, which is often perceived as complex and demanding.

Listable companies display poor diversification in the types of external interlocutors to whom they make recourse for business financing decisions, often made in complete autonomy (40.0% of cases).

The role of investment banks in planning and structuring these operations is still not well established, as the privileged advisors to these businesses continue to be those that flank them in ordinary management: commercial banks (38.5% of businesses) and business consultants (26.0%). On the whole, the level of service is not perceived as satisfactory and this opinion appears to be generalised with respect to the various interlocutors.

To date, merchant banks do not seem to have reached the entire pool of potential clients: among those companies that still have not thought about the possibility of listing (42.2% of the total), only one in four has been contacted with a proposal for listing on the Borsa in the last two years.

The greatest difficulty businesses attribute to the listing process is managing the reorganisation phase. This gives Borsa Italiana an opportunity to offer companies a listing plan structured to address the different categories of issuers and to offer brokers a more articulated service, even in terms of consulting and organisational support.

Factors tied to the cost burden of listing are important but carry less weight; those problems concerning the time required for the listing procedure are considered less important.

On the other hand, the fear of losing control of one's own company through listing seems to have vanished, while the transparency required by the market is still perceived as problematic.

Milan, 10 February 2003