The impact of golden power regulation on M&A activity in the non-financial private sector

This paper examines the Italian framework governing special powers ('golden power'), which grants the Government the authority to review and restrict corporate transactions involving firms operating in strategic sectors. Although intended to safeguard the public interest, this legislation could discourage investment by introducing regulatory uncertainty and administrative burdens. After reconstructing the evolution of the regulatory framework-characterized by a substantial expansion of the scope of special powers in 2020-we quantify the impact of the legislation on merger and acquisition (M&A) activity using a new firm-level dataset. The results reveal heterogeneous effects: M&A activity remained broadly unchanged in sectors rarely subject to governmental intervention, whereas it declined temporarily (during 2021–2022) in sectors where the powers were effectively exercised. In these sectors, which are among the most productive and innovative segments of the economy, we estimate that approximately 350 merger and acquisition transactions have been 'missing' since 2020, most of them in the manufacturing industry. The disappearance of this effect from 2023 onwards, including in these sectors, suggests that investor uncertainty regarding the application of these powers has diminished, thereby reducing their expected cost.