Italy promises to be one of Europe’s most dynamic markets for restructuring activity and distressed M&A investment this year.
The economy’s exposure to geopolitical shocks—from supply-chain disruption to spikes in energy and commodity prices—has kept volatility elevated. Rising volumes of cases across 2024–2025 confirm this shift: business-crisis procedures rose 29% in H1-2025 (7,116 vs 5,505 in H1-2024), with judicial liquidations making up 74% of cases.
In parallel, reforms to Italy’s insolvency laws and regulations, ushered in by the codice della crisi d’impresa e dell’insolvenza (CCII), have led to a shift in culture and practice among Italian businesses, banks and other lenders towards using restructuring tools early to rescue viable businesses.
Italy’s composizione negoziata, a negotiated, out-of-court proceeding with an independent expert, has become the preferred starting point for companies in difficulty. According to Unioncamere, the national association of the Chambers of Commerce, there were 1,089 petitions in 2024 (almost double those in 2023).
Meanwhile, the concordato semplificato, a recently introduced, court-approved liquidation option that is available only after a failed composizione negoziata, remains limited (85 filings in 2024), suggesting that formal liquidation is no longer considered the default in situations where a going-concern sale remains viable.
The operating environment in Italy, while improving, remains challenging. Long-term factors including tariffs, higher operating costs and rising competition continue to buffet the national economy. While EU household electricity and gas prices hit record levels in H2 2022, the energy-price shock has since moderated.
At the same time, pandemic-era credit support such as SACE’s “Garanzia Italia” state-guaranteed loans that provided EUR42 billon of funding by June 30, 2022, has left a wall of maturing debt that companies will need to refinance over the next couple of years. A large share of corporate debt is likely to fall due in 2028–2029, which is a key reason for the likely rise in the 2026–2027 restructuring pipeline.
Together, these conditions provide the impetus for management to use earlier, structured solutions in 2026 and to carry out in-depth due diligence on the business’s health and prospects, alongside credible restructuring plans and implementation timetables that can satisfy court scrutiny.
Distressed M&A opportunities
Some of Italy’s most valuable industries and sectors are facing mounting stress, which is likely to trigger significant restructuring activity and potentially distressed M&A opportunities. In our view, three practical factors will shape the 2026 pipeline: parties acting earlier; the operational and commercial pressure to maintain and secure business continuity; and closer scrutiny of evidence and fairness in restructuring plans presented to the courts.
The rising volume of bankruptcy proceedings since 2022, which is projected to be more than 61% higher by 2025 on the current run-rate, helps explain why earlier management engagement with restructuring plans is becoming the default. A notable feature of this economic cycle is the prevalence of private-equity portfolio companies, bringing more sophisticated decision-making and financing dynamics than the traditional family-owned base.
Automotive
The automotive sector is being hit hard by a raft of pressures, from rising manufacturing and production costs to declining consumer activity. The result is that industrial output in Italy’s automotive supply chain fell 23.9% in Q1-2025 vs Q1-2024 according to ANFIA, the national Association of the Automotive Industry, while January 2025 registrations dropped 5.9% year-on-year.
Auto businesses also have to contend with challenging operating pressures that can restrict how they respond to distress in their supply chains. Most notable of these is the need for production continuity and therefore supplier continuity. Manufacturing lead times in the sector tend to be long, and many production lines focus on a single model, so swapping a supplier that’s facing insolvency can be slow and risky.
As a result, manufacturers are often obliged to support critical suppliers in trouble to avoid production stoppages. That support enables continuity-first transactions, including short-term stabilization finance, carve-outs of viable units and roll-ups to build scale. In the latter instances, this typically involves financial sponsors partnering with local industrial operators that can manage technical and operational risks to keep plants running. Where quick support is needed, courts can authorize super-senior funding (including shareholder loans) and business-unit transfers on a going-concern basis, with safe-harbor protections for properly authorized transactions.
Fashion, manufacturing and food
The fashion, manufacturing and food sectors are also facing a period of sustained stress and likely to be seeing high restructuring and distressed M&A activity in 2026.
In fashion, sector exports dropped 2.5% year-on-year in the first seven months of 2025 to EUR21.7bn, while in retail demand softened in March 2025: food sales fell 0.5% year-on-year in value and 0.9% in volume, contributing to a 2.8% year-on-year decline in total retail value and 4.2% in volume.
Italian fashion is facing a tough period, with falling sales and production, especially in textiles and apparel, as demand drops and price increases can’t make up for lower volumes. Brands that depend heavily on Asia are struggling due to weaker luxury demand there, and worries about tariffs and slower global trade are making exports harder.
Turning things around is challenging because the sector needs deep expertise in consumer trends, creative strategy, product mix, and brand strength, which take time to improve. Added problems like supplier fragmentation and factory closures mean recovering will be slow and risky. To cope, fashion companies need to find synergies—such as joint sourcing, shared operations, and better sales channels—to lower costs and strengthen their brands. Expanding into new markets can also help reduce dependence on Asia.
Likewise, food processors and foodservice companies are struggling with higher energy and ingredient costs, which are squeezing profits in a sector already known for low margins. Because most producers are small and big retailers have the power, it’s hard to pass these costs on to shoppers. Even though people are still spending on food, competition, rules, and more store-brand options make it tough to raise prices.
For a successful restructuring, synergies and a better control and visibility over the supply chain are essential.
Similarly, manufacturing is facing its own headwinds. Industrial production in Jan–Sep 2025 was down 0.7% versus the same period in 2024, while the HCOB Italy Manufacturing PMI fell to 47.9 in December 2025 from 50.6 in November, underlining the declines in output and new orders.
Operationally, manufacturers are navigating post-pandemic normalization from prior backlog peaks to more normal run-rates, exposing excess capacity and reducing operating leverage. At the same time, the twin transitions—digital and green—are capex-intensive: investments in automation, data, electrification, and efficiency (including heat recovery and process optimization) are needed to restore competitiveness and meet EU decarbonization and reporting requirements.
How Italy delivers outcomes: the CCII route from diagnostics to court approval
A key change the CCII has introduced is incentivizing management to respond to warning signs of stress earlier than in previous periods of economic downturn. Under the current framework, statutory auditors must raise concerns promptly, which focuses management on documenting the steps it will take to address the stress on its business.
From there, Italy’s negotiated composition proceeding (composizione negoziata della crisi) allows the business to appoint an independent expert and ask the court for protective measures that can pause enforcement action while negotiations are ongoing. In practice, composizione negoziata gives a business breathing space: protective measures can last between 30 and 120 days and be extended up to 240 days.
If rescue is unlikely to succeed, the code provides a quick, court-supervised process to sell a viable business unit, including the concordato semplificato, so that value can be preserved. Under the simplified concordato a court-appointed liquidator implements the plan.
Court approval for these sales typically hinges on three fundamental issues:
- Value: Does the restructuring plan offer a better economic option than liquidation?
- Evidence: Are valuations and assumptions put forward by authoritative experts that the court is likely to recognize?
- Fairness: Are creditor classes created fairly and in line with legal requirements? For example, does the plan provide a clear rationale for the class structure and why creditors have been allocated their position?
In concordato preventivo, the court checks that class design reflects each creditor’s legal rank and economic interests and applies liquidation value as the baseline for determining priority. Plans that address these issues effectively are likely to move faster and offer better deal-certainty. In situations where consensus among creditors cannot be reached, dissenting creditor classes can be crammed down and, in some cases, even shareholders, so long as no one is worse off than in liquidation. If plans require approvals from tax or social-security authorities, the court can consider a lack of response from them to be a form of consent, enabling the restructuring to continue without their explicit agreement.
A notable risk that must be factored into such restructuring plans is the likelihood of litigation. Although most restructurings under the CCII are usually resolved consensually, the newer cram-down tools may well be tested in court, particularly where cram-down orders attempt to bind shareholders.
Early creditor challenges are also likely to focus on how classes are drawn and on the liquidation value baseline needed to meet the ‘‘no worse off’’ requirement.
Cross-border recognition and enforceability
Crossborder risks and obstacles can often be mitigated with early planning. Inside the EU, the insolvency regulation framework coordinates listed proceedings and recognition across member states.
Beyond the EU, the position is less clear. The UK position has become more complex post-Brexit and there is no Italian equivalent of U.S. Chapter 15. This means preparing a restructuring for cross-border would require additional efforts in order to have foreign proceedings (and relevant outcomes) recognized in Italy, increasing both the uncertainty and the potential for litigations. In strategically sensitive sectors, such as defense and telecoms, Golden Power scrutiny can be tighter, so early filings should run in parallel with deal workstreams.
What management, creditors and investors should prioritize in the year ahead
For businesses under stress, the crucial requirement is to act early and to start a detailed assessment of the business’s current health and prospects for rescue. It is crucial to engage experienced advisors in complex turnarounds from the very beginning. Their early involvement helps to streamline the intervention process, develop a robust restructuring strategy, and implement measures that minimize disruption to the core business.
Creditors should focus on understanding valuation baselines and class logic and whether it makes sense for them to back a rescue plan or a sale.
For investors, the CCII offers strong procedural protections while putting business continuity at the centre of outcomes. However, due diligence, particularly around foreign direct investment rules and national security screening assessments, should be a key consideration from the outset.
