How CAPZA is turning Italy’s small and mid-market into a growth engine for European private capital
In an era where high interest rates and subdued exit markets are reshaping private equity, adaptability has become a defining advantage. Investors with a focus on small and mid-market companies—where leverage is moderate, exits are more flexible, and value creation is operational—are finding themselves better positioned than those reliant on large buyouts. Few firms embody this shift as clearly as CAPZA, whose model combines flexible capital structures with deep regional expertise.
At the upcoming 0100 International conference in Milan, Stefano Zavattaro, Partner and Head of Italy at CAPZA, will share his perspective during the panel “Scaling Under Pressure — Rethinking Large Capital Buyouts in the Age of Higher Rates and Tighter Exits.”
He’ll be joined by Raffaele Legnani, Managing Director and Head of Italy at H.I.G. Capital, and Sharand Maharaj, Co-Managing Partner at MML Capital Partners, in a discussion moderated by Saverio Rondelli, CEO and Head of Italy at Lincoln International.
In this interview ahead of the event, Stefano discusses how CAPZA is navigating this new landscape—leveraging flexibility, local insight, and sustainability to scale resilient companies across Europe, with Italy playing an increasingly strategic role.
With higher interest rates and tighter exit markets, large buyouts are under stress. How is CAPZA’s focus on small and mid-market companies better suited to this environment?
CAPZA’s focus on small and mid-market companies is generally better suited to the current environment of higher interest rates and tighter exit markets compared to large buyouts, as these segments tend to offer greater flexibility, lower leverage, and adaptability for both investment and exit strategies.
Investment strategy
First of all, CAPZA’s PE funds have a very flexible mandate, which allows them to complete minority deals as well as change of control ones, also full equity or via structured equity schemes. That makes us less vulnerable to market turmoil and eventually offers us a broader spectrum of investment opportunities.
Market Dynamics and Leverage
Small and mid-market companies typically operate with lower leverage ratios than large buyouts, which reduces their sensitivity to interest rate increases. In periods of rising rates, heavily leveraged large buyouts face pressure on debt servicing and covenant compliance, while smaller deals can endure these conditions with comparatively less financial strain. CAPZA’s emphasis on moderate gearing and conservative debt structures further insulates its investments from volatility in financing costs.
Exit Flexibility and Liquidity
Unlike large buyouts, which depend heavily on public market IPOs or large trade sales for exit, small and mid-market deals present broader exit options, including secondary buyouts, sale to strategic buyers, or management buybacks. Tighter exit markets, characterized by fewer IPOs and reduced M&A activity, impact large deals severely, while the mid-market benefits from a broader buyer pool and continued private transactions even during downturns. Over the past 18 months, CAPZA has exited 5 deals from its Flex Equity 4 fund, demonstrating the flexibility and adaptability of this strategy to deliver liquidity for investors even in challenging market conditions.
Resilience and Value Creation
CAPZA’s investment model focuses on active engagement and operational improvements in portfolio companies, which is especially valuable during economic instabilities. Small and mid-market companies are more responsive to growth initiatives, cost optimizations, and management support, allowing CAPZA to unlock value and drive resilient returns even when macroeconomic headwinds slow down large-scale corporate transactions.
CAPZA now manages around €9.9 billion across six complementary strategies. Which areas are seeing the strongest momentum today, and how is Italy contributing to that growth?
CAPZA indeed manages around €9.9 billion across six complementary strategies, with private debt and flex equity showing the strongest momentum today. Italy is making a significant contribution to growth, especially in the private debt segment where CAPZA recently completed two deals. The Italian market is increasingly attractive for alternative direct lending and CAPZA’s local presence is driving increased deal flow and portfolio expansion. However, we also see a strong contribution by flex equity in the coming 12 months as pipeline fills up significantly after a softer first half of the year. Namely, we are currently negotiating a few opportunities in the Digital and Healthcare spaces.
You’ve been leading CAPZA’s expansion in Italy. What unique opportunities and challenges do you see in the Italian small and mid-market segment compared to other European geographies?
Italy’s small and mid-market segment offers several unique opportunities and challenges compared to other European geographies.
The Italian market features a vibrant SME ecosystem with strong growth potential, especially as more companies seek flexible equity capital or financing solutions outside the traditional banking sector. Italy has the largest primary market in Europe, characterized by family-run businesses affected by succession and size issues and thus particularly fit for flexible private capital solutions like ours.
Italian SMEs are particularly open to buy-and-build strategies, internationalization, and operational transformation, creating attractive conditions for investors with local presence and sector expertise. In addition, recent regulatory changes and a shift toward alternative lending have opened the market to non-bank players like CAPZA, which now provides direct lending and customized funding to Italian businesses.
While Italy’s private equity and private debt markets have historically been less mature than those in France or Germany, important progress is underway. Recent years have seen rising deal sophistication, more creative structuring, and a surge in private credit solutions that make deal execution faster and more flexible. The investor base is diversifying, thanks to regulatory reforms, growing interest from international funds, and increased allocations from high-net-worth individuals, all of which are helping to deepen market liquidity and reduce historic cyclicality. As Italy continues to attract capital—driven by attractive SME opportunities, resilience in key sectors like tech and healthcare, and a pro-business climate—challenges are steadily being transformed into catalysts for further market development.
Overall, CAPZA’s regional office and flexible approach position it uniquely to tap into Italy’s growing but underpenetrated small and mid-market, turning local complexity into a source of opportunity
CAPZA has developed expertise in sectors like health, technology, and services. Where do you see the most urgent need for capital in Italy, and how is CAPZA helping companies scale sustainably?
The most urgent need for capital in Italy is in the healthcare, technology, and business services sectors, and next-generation industrial automation. CAPZA has actively supported growth in these areas by arranging equity deals or flexible financing—including unitranche and senior debt—to drive expansion, sector consolidation, and buy-and-build strategies. For example the refinancing of F2A, a leading HR and F&A tech-enabled services provider backed by Ardian to complete a number of add-ons or the LBO of Eidosmedia alongside the existing management team to support its expansion into new verticals and markets.
Sustainable scaling is central to CAPZA’s value-add. By tailoring financial solutions and promoting responsible business practices, CAPZA helps Italian companies optimize digital transformation, implement ESG strategies, and innovate operational processes, contributing to resilient, long-term growth across its portfolio. The firm’s pan-European network ensures knowledge transfer and best practice sharing, further strengthening the sustainability of Italian businesses under CAPZA’s stewardship.
Institutional investors and family offices are rethinking their allocations, especially in private markets. What trends are you seeing among Italian LPs, and how are their priorities shifting?
Overall, the Italian LP landscape is becoming more sophisticated and outward-looking, focused on yield, innovation, and stability in a changing global environment. Italian institutional investors and family offices are actively rethinking their allocations in private markets, with notable shifts in priorities. There is growing interest in private equity, private credit, as LPs seek greater diversification, resilience, and access to high-quality assets outside traditional public markets. In addition, local private capital association AIFI, has been effectively lobbying on institutions to reduce regulatory red tape and adopt best practices to broaden the addressable LP base in Italy.
With Milan increasingly positioning itself as Europe’s next financial capital, how is CAPZA planning to leverage this momentum for its Italian and European portfolio?
Milan’s rise as Europe’s next financial capital offers CAPZA valuable access to international investors, talent, and a dynamic business ecosystem. CAPZA’s Milan office supports Italian portfolio companies with local expertise, facilitates cross-border growth for European assets, and helps structure innovative deals by leveraging the city’s favorable financial environment and regulatory improvements. This positions CAPZA to scale investments and source new opportunities across both Italy and Europe efficiently.
As everybody knows, Milan is located at the very heart of industrial Northern Italy and thus is the perfect spot to reach out to the most promising businesses.