"Labour market reforms in Spain have really made a difference, they finally allow some real restructuring," the head of a large European private equity group said.
Private equity firms buy companies, try to boost their profitability by cutting costs, merging them with rivals or shaking up operations, and then sell them on in the hope of making a return.
While many investors have seen political stability as an issue when thinking about investments in Italy, some private equity managers say that companies with good products are more or less immune to the political environment.
"I think Italy is a great place to invest. I am positive that we will see a pick up in private equity investments in Italy in 2014," said Carlyle's co-head of the Europe Buyout, Gregor Boehm.
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The abundance of medium-sized companies, especially in the engineering, fashion and food industries and which are in need of capital for international expansion as attractive targets, Boehm said.
"We have made some great returns for our investors there - like recently when selling Moncler - and will definitely stay active in Italy," he said, referring to the December listing of the Italian luxury ski-wear maker Moncler.
But any investor buying into southern Europe must keep in mind the ill fate of private equity house Oaktree, whose Spanish doughnut maker Panrico filed for insolvency or that of Carlyle which sold tour operator Globalia for a fraction of its original investment.
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Careful of doing their homework before launching into insecure territory, not many buyout groups have struck deals of late.
Investment volumes of buyout groups in southern Europe have continued to drop since the start of the debt crisis, contrasting with a strong rebound in northern Europe, especially over the past two years.
In 2013, Spain saw equity investments from buyout groups decline to $867 million from $1.2 billion a year earlier, while total investments reached only $208 million in Italy, one third of what it was in 2012, according to Thomson Reuters data.