How to Structure an LBO in Italy, Step by Step (SPV & Merger Routes, 2026 Compliance)

Understanding how to structure an LBO in Italy step by step has never been more critical for deal teams. The regulatory landscape shifted materially when the Decreto Transizione 5. 0 amended Italy’s golden power rules on 9 February 2026, expanding the government’s screening authority over acquisitions in strategic sectors. At the same time, CONSOB’s takeover regime under the Testo Unico della Finanza (TUF) continues to set hard thresholds that can transform an otherwise private transaction into a mandatory public tender offer.

Financial assistance restrictions under Article 2358 of the Codice Civile remain the single most important structural constraint on any Italian leveraged buyout, dictating whether a sponsor proceeds via a standalone SPV acquisition or opts for the merger leveraged buyout (MLBO) route. This guide walks through the complete process, from vehicle selection and due diligence to debt structuring, regulatory clearance and post-closing governance, with a compliance-first orientation calibrated to 2026 requirements.

1. LBO Basics and Structuring Options in Italy, SPV vs Merger Route

A leveraged buyout uses a significant proportion of borrowed funds to acquire a target company, with the target’s own cash flows ultimately servicing the acquisition debt. In Italy, sponsors typically choose between two principal structuring routes: the SPV acquisition model and the merger leveraged buyout (MLBO). Each carries distinct legal, tax and timing implications that shape how an LBO in Italy is structured step by step.

How Is an LBO Structured?

At its core, an LBO capital stack comprises three layers: sponsor equity (typically 30–50 per cent of enterprise value), mezzanine or subordinated financing, and senior secured bank debt. The sponsor incorporates a special purpose vehicle (SPV), injects equity, arranges debt facilities, and uses the combined proceeds to acquire 100 per cent (or a controlling stake) of the target. Post-acquisition, the target’s operating cash flows are directed toward debt service through dividends, management fees or, if the merger route is selected, direct assumption of the acquisition debt by the merged entity.

The choice between SPV-only and MLBO is rarely a binary decision, it is driven by the interaction of financial assistance constraints, tax efficiency goals and the regulatory profile of the target. The sections below unpack each variable in sequence.

2. Step-by-Step LBO Structuring in Italy, The Practical Playbook

This section sets out the core procedural steps for structuring an LBO in Italy step by step, using the standard SPV acquisition route. Where the MLBO path diverges, it is addressed in Section 3.

2.1 Target Analysis and Pre-Deal Due Diligence

Before any structuring decision, the sponsor must complete legal, financial and regulatory due diligence on the target. The key DD workstreams with LBO-specific relevance include:

• Change-of-control clauses. Review all material contracts, financing agreements, joint-venture pacts, key customer and supplier contracts, and public concessions, for clauses triggered by a change of ownership. A single unwaivable change-of-control covenant in the target’s existing bank facilities can fundamentally reshape deal timing.
• Golden power exposure. Determine whether the target operates in sectors covered by golden power screening (defence, national security, 5G / telecoms, energy, transport, food, health and, since 2026, broadened critical-technology verticals). If it does, plan for a pre-notification window of at least 45 calendar days before closing.
• Takeover threshold mapping. If the target is listed, model whether the proposed acquisition, at signing and after any subsequent call-option exercises or management roll-ins, could cross mandatory OPA thresholds under Articles 106–108 of the TUF.
• Financial assistance flags. Assess whether the target’s assets (or cash flows) will directly or indirectly secure or service the acquisition debt, triggering Article 2358 Codice Civile restrictions.
• Tax structure review. Map the target’s existing tax consolidation arrangements, carried-forward losses, and intercompany financing structures against Italian interest-deductibility ceilings.

2.2 Choosing the Vehicle, Italian SPV Formation

The acquisition vehicle is almost always a newly incorporated Italian company, either a società a responsabilità limitata (s.r.l.) for smaller mid-market deals or a società per azioni (s.p.a.) for larger transactions where bond issuances, structured equity incentive plans or listing-track governance are anticipated. Incorporation requires a notarial deed and registration with the Registro delle Imprese. Minimum share capital is €1 for an s.r.l. and €50,000 for an s.p.a., although acquisition SPVs are typically capitalised well above minimums once equity is committed.

Industry observers expect that most Italian LBOs in 2026 will continue to favour the s.p.a. form for larger transactions, given its compatibility with sophisticated shareholder agreements, stock option plans and multi-tranche financing structures.

2.3 Sources and Uses, How Do I Build an LBO?

Modelling the sources and uses of funds is the financial spine of every LBO. On the sources side, the deal team maps committed equity (sponsor cash and any management roll-in), senior secured debt (term loan A / B), and mezzanine or subordinated financing. On the uses side, the model accounts for the equity purchase price, transaction costs (legal, DD, arrangement fees), and any refinancing of the target’s existing indebtedness.

Practical steps for building the LBO model in an Italian context:

1. Determine the entry valuation using an EV/EBITDA multiple appropriate to the sector and current market conditions.
2. Define the target capital structure, equity percentage, senior and junior debt tranches, and any vendor financing or earn-out components.
3. Draft the debt schedule, including amortisation profiles, cash sweep mechanics and bullet repayment dates.
4. Test covenant headroom against downside operating scenarios (EBITDA decline, capex overrun, working-capital stress).
5. Model the exit, typically a secondary sale, IPO or recapitalisation, at the sponsor’s target holding period (usually 4–6 years) and validate the return profile.

2.4 Security Package and Intercompany Guarantees

Lenders to the SPV will require a comprehensive security package. In a typical Italian LBO, this includes a pledge over the shares of the target (and the SPV itself, if a holdco layer exists), an assignment of receivables, and, post-MLBO, mortgages over key real-estate assets. Perfection requirements differ by asset class: share pledges require annotation in the shareholders’ register and filing with the Registro delle Imprese; real-estate mortgages require notarial inscription at the relevant Conservatoria.

Critically, all upstream guarantees and security granted by the target to secure the SPV’s acquisition debt must be tested against the financial assistance prohibition. If the transaction will not proceed via MLBO, the security package at the target level must either fall within one of the narrow Article 2358 exceptions or be deferred until the merger is completed.

2.5 Transaction Documents and Timing

The typical document suite for an Italian LBO includes:

• Share Purchase Agreement (SPA). Sets out purchase price, conditions precedent (including regulatory clearances), representations and warranties, and indemnification mechanics.
• Senior Facilities Agreement (SFA). Governs the term loan and revolving credit facility, including drawdown conditions, financial covenants and events of default.
• Intercreditor Agreement (ICA). Establishes the priority waterfall between senior and mezzanine lenders, standstill periods and enforcement coordination.
• Shareholders’ Agreement. Regulates governance, reserved matters, transfer restrictions, tag/drag rights and the management incentive plan.
• Management Investment Agreement. Where management rolls equity into the SPV, common in management buyouts, this document sets out co-investment terms, good/bad-leaver provisions and vesting schedules.

In practice, the documentation timeline from signing a term sheet to closing runs 8–14 weeks for a mid-market deal, extending to 16+ weeks where golden power notifications, antitrust filings or CONSOB clearances are required.

2.6 Closing Mechanics and Escrow

Closing typically involves simultaneous execution of the SPA, drawdown under the SFA, equity injection, and share transfer. Funds are frequently routed through a notarial or escrow account. Post-closing, the sponsor files updated shareholder details with the Registro delle Imprese, notifies relevant regulators (including tax authorities for group consolidation elections) and registers any security interests.

Red flags to monitor at closing: unresolved golden power conditions, outstanding change-of-control consents from commercial counterparties, and any pending antitrust review under either the Italian Competition Authority (AGCM) or the EU Merger Regulation (if thresholds are met).

3. Merger Leveraged Buyout (MLBO) Route, Legal and Tax Mechanics in Italy

The merger leveraged buyout in Italy involves a post-acquisition merger of the SPV into the target (forward merger) or of the target into the SPV (reverse merger). The legal basis sits in Articles 2501-bis and 2501-sexies of the Codice Civile, which impose specific disclosure and procedural safeguards when a merger is financed with acquisition debt.

The statutory steps for an MLBO include:

1. The boards of both the SPV and the target approve the merger plan, which must disclose the financing sources and the rationale for the leveraged structure.
2. An independent expert appointed by the court issues a fairness opinion on the share exchange ratio and the economic sustainability of the debt burden post-merger.
3. The merger plan is filed with the Registro delle Imprese and creditors are given a 60-day opposition period.
4. Shareholders’ meetings of both entities approve the merger.
5. The merger deed is executed before a notary and registered, after which the merged entity assumes the SPV’s acquisition debt.

The primary advantage of the MLBO route is debt pushdown: once the merger is effective, the acquisition debt sits on the balance sheet of the surviving entity, enabling direct debt service from operating cash flows and, equally important, giving lenders recourse to the full asset base without offending the financial assistance prohibition. The process typically takes 6–12 weeks from the filing of the merger plan, driven primarily by the mandatory creditor opposition period.

4. Financial Assistance Rules in Italy, Art. 2358 Codice Civile

Article 2358 of the Codice Civile is the single most consequential provision for sponsors assessing how to structure an LBO in Italy step by step. It prohibits a company from advancing loans, providing guarantees, or otherwise furnishing financial assistance for the acquisition of its own shares, unless strict conditions are met.

What Triggers Financial Assistance?

The prohibition is broadly drafted. It captures direct lending by the target to the acquirer, upstream guarantees, and the granting of security over the target’s assets to secure the SPV’s acquisition debt. In substance, any arrangement in which the target’s balance sheet supports the financing of its own purchase is prima facie caught.

Permitted Exceptions and Solvency Checks

Following the 2003/2004 reform of Italian company law, Article 2358 permits financial assistance by an s.p.a. provided that:

• Shareholder approval. The assistance is authorised by an extraordinary general meeting, with a resolution passed by a qualified majority.
• Board report. The directors prepare a detailed report setting out the economic justification, the terms of the transaction, the price at which shares are being acquired, and the impact on the company’s financial position.
• Solvency test. The assistance must be funded from distributable reserves, verified by audited accounts. The company’s net assets, after giving effect to the assistance, must not fall below the aggregate of share capital and non-distributable reserves.
• Registration. The resolution is filed with the Registro delle Imprese.

In practice, satisfying these conditions for a large-scale LBO is burdensome and introduces deal uncertainty, which is precisely why most Italian LBOs proceed via the MLBO route instead. By merging the SPV and the target, the surviving entity services debt that is now its own obligation, rather than providing “assistance” for a third party’s acquisition.

Structuring Tips for Sponsors and Lenders

Where a direct financial assistance path is chosen (common only in smaller or closely held situations), the following safeguards are standard:

• Escrow mechanics. Assistance funds are held in escrow until all procedural conditions (shareholder vote, filing, solvency confirmation) are satisfied.
• Solvency opinions. Independent auditor certificates are obtained pre- and post-transaction to demonstrate compliance with the distributable-reserves test.
• Condition precedent in SFA. Lenders require, as a condition to drawdown, confirmation that all Article 2358 requirements have been met and that the resolution has been filed without opposition.

Lenders should be aware that structuring around financial assistance is not risk-free: a transaction that is later found to violate Article 2358 is void, and lender security interests could be unwound. Early independent legal review is essential.

5. Leverage, Covenants and the Lender Perspective

Debt quantum in an Italian LBO depends on sector, target quality and prevailing credit-market conditions. Rather than prescribing fixed leverage multiples, sponsors should benchmark against recent comparable transactions and stress-test the capital structure under multiple operating scenarios. Industry observers expect that Italian mid-market LBO leverage in 2026 continues to settle around levels consistent with 3–5x senior debt / EBITDA, with total leverage (including mezzanine) extending further depending on sector resilience and sponsor track record.

Debt Stack and Typical Covenants

Understanding how an LBO is structured at the debt level is essential for both sponsors and target management. The typical Italian LBO debt stack includes a senior term loan (amortising), a revolving credit facility for working capital, and, in larger deals, a mezzanine tranche or high-yield bond.

Amortisation profiles for Italian LBO term loans typically feature modest scheduled amortisation (1–5 per cent per annum) with a bullet repayment at maturity (5–7 years), supplemented by mandatory cash sweep provisions that accelerate repayment from excess cash flow.

6. Regulatory Compliance, Golden Power and Takeover Thresholds (2026 Checkpoints)

Two regulatory regimes require early analysis in every Italian LBO: golden power screening and the mandatory OPA rules under the TUF. Both received significant policy attention heading into 2026.

Golden Power Italy 2026, Trigger Events and Deal Impact

Italy’s golden power framework empowers the Presidency of the Council of Ministers to block, impose conditions on, or unwind acquisitions of companies operating in strategic sectors. As of 9 February 2026, the Decreto Transizione 5.0 broadened the scope of golden power screening, expanding the definition of strategic assets to include additional critical-technology and digital-infrastructure categories.

Practical compliance steps for sponsors:

• Screen the target’s activities against the expanded sector list published by the Presidency (available at the government’s golden power data portal).
• File a notification within 10 business days of signing the SPA (or, for internal restructurings, within 10 business days of the board resolution). The government then has 45 calendar days (extendable) to review.
• Plan for conditions. Industry observers expect that the government will increasingly attach behavioural conditions (employment commitments, data-localisation requirements, R&D undertakings) rather than outright vetoes. Early pre-notification engagement with the Presidency can significantly reduce deal risk.

Takeover Rules Italy 2026, Mandatory OPA Under TUF Articles 106–108

If the target is listed on a regulated Italian market, an acquisition that results in the purchaser holding more than 30 per cent of voting rights triggers a mandatory offerta pubblica di acquisto (OPA) under Article 106 of the TUF. A further consolidation OPA may be triggered at the 90 per cent threshold (Article 108 TUF), while squeeze-out and sell-out rights crystallise at 95 per cent.

LBO structuring must account for these thresholds from the outset. A share purchase that is structured to remain below 30 per cent at signing but that is intended to reach control via subsequent steps (options, convertible instruments, concert-party arrangements) may still be caught by CONSOB’s look-through approach and related regulations under the Regolamento Emittenti.

Compliance checklist for LBO deal teams:

• Map the post-acquisition shareholding (including all instruments convertible into equity) against the 30 per cent, 90 per cent and 95 per cent thresholds.
• Assess whether any co-investors, management shareholders or rolled-over vendors could be deemed concert parties under CONSOB guidance.
• Budget for mandatory OPA timing: from the filing of the offer document to CONSOB approval and the offer period, the process typically adds 4–8 weeks to the transaction timeline.
• Factor OPA pricing rules into the acquisition economics, the mandatory OPA price must at least equal the highest price paid by the offeror in the preceding 12 months.

7. Post-Closing Governance, Tax and Minority Protections

Once the acquisition closes, the sponsor must establish the governance framework, manage ongoing tax compliance, and respect minority-shareholder protections, particularly where the target is listed or retains third-party minority investors.

• Board composition. The shareholders’ agreement will typically reserve the right to appoint a majority of directors and key-person officers to the sponsor, with minority directors and independent board members as required by law (for listed entities) or by lender covenants.
• Management incentive plans. Management buyout structures typically involve a co-investment mechanism (sweet equity or stock options) with good-leaver / bad-leaver provisions, vesting over the anticipated holding period.
• Interest deductibility. Italian tax law limits the deductibility of net interest expenses to 30 per cent of EBITDA (with carry-forward of unused capacity). This ceiling is a key driver of LBO financial modelling and often determines the optimal level of leverage.
• Group tax consolidation. Post-acquisition, the sponsor may elect for the Italian fiscal unity regime (consolidato fiscale nazionale), allowing the SPV and the target to offset profits and losses for corporate income tax purposes.
• Transfer pricing. Intercompany management fees, service charges and loan pricing between the SPV, the target and any offshore holding entities must be set at arm’s length and documented in accordance with OECD guidelines as implemented in Italian law.

Conclusion, Practitioner Checklist for Structuring an LBO in Italy

Successfully structuring a leveraged buyout in Italy in 2026 demands a compliance-first mindset that integrates legal, regulatory and financial considerations from the earliest stages of deal origination. The expanded golden power framework, the enduring strictness of Article 2358 on financial assistance, and the hard triggers embedded in the TUF’s mandatory OPA rules mean that structuring choices made at the term-sheet stage can have irreversible consequences at closing and beyond.

For deal teams seeking a concise reference on how to structure an LBO in Italy step by step, the following ten-point checklist summarises the critical path:

1. Complete target due diligence with LBO-specific focus (change-of-control, golden power, takeover thresholds).
2. Incorporate the SPV (s.r.l. or s.p.a.) and capitalise with committed equity.
3. Model sources and uses; stress-test covenant headroom under downside scenarios.
4. Negotiate and execute the SPA, SFA, intercreditor agreement and shareholders’ agreement.
5. File golden power notification (if applicable) within 10 business days of signing.
6. Assess and plan for mandatory OPA obligations if the target is listed.
7. Close the acquisition: drawdown, equity injection, share transfer, security perfection.
8. If MLBO route selected: initiate merger process (board resolution, expert opinion, creditor opposition period, shareholders’ vote, notarial deed).
9. Establish post-closing governance, management incentive plans and tax consolidation elections.
10. Monitor ongoing compliance: interest deductibility caps, transfer pricing documentation, regulatory reporting and minority-protection obligations.

Sources

1. CONSOB, OPA / Takeover Rules (Investor Education)
2. CONSOB, OPA Obbligatoria
3. Codice Civile, Art. 2358 (Financial Assistance)
4. Golden Power, Government Data Portal
5. DLA Piper, Decreto Transizione 5.0 and Golden Power 2026 Changes
6. International Tax Review, Italy: The Italian Way to LBOs
7. Luiss Thesis (Merola), Leveraged Buyout Structuring and Regulation
8. Macabacus, LBO Capital Structure Explainer
9. Wall Street Prep, Basics of an LBO Model
10. Abacum, LBO Model Fundamentals