Italy’s family-owned defense companies are experiencing significant growth and profitability, surpassing both state-run enterprises and foreign competitors, according to a recent report by Mediobanca. Family-run firms have historically served as a cornerstone of Italian capitalism, contributing to the country becoming the eighth largest manufacturing power globally. The report highlights that these medium-sized family businesses account for €6.3 billion ($6.6 billion), representing 15.6 percent of Italy’s defense sector revenue.
In a remarkable showcase of financial performance, medium-sized family firms reported an Earnings Before Interest and Taxes (EBIT) margin of 12.2 percent last year, almost double the national average of 6.2 percent. Notably, DEAS – Difesa e Analisi Sistemi, a small cyber firm, topped the chart with an impressive EBIT margin of 54 percent, followed closely by GEM Elettronica, which maintains a margin of 44.5 percent and has been a player in the naval electronics industry since 1977 before being acquired by defense giant Leonardo in September.
The report’s authors attribute the success of Italian family-owned medium-sized enterprises to their lean and adaptable operating structures, which contribute to their ability to outperform larger state-owned and foreign firms. Family firms have also shown substantial growth potential, recording a 29.2 percent increase in 2023. Carlo Festucci, the general secretary of the Italian defense industry association AIAD, explained that these smaller firms enjoy greater growth margins and play a crucial role in the supply chains of larger companies, which enhances the latter’s operational flexibility.
In addition to highlighting the performance of family-owned businesses, the Mediobanca report provided insight into the broader landscape of Italy’s defense industry. It noted that 36 of the top 100 firms operating in Italy are foreign-owned, collectively accounting for 25.1 percent of the sector’s turnover. Meanwhile, state-owned giants like Leonardo and the shipyard Fincantieri contribute to 59.3 percent of the total turnover, reflecting the dominance of larger enterprises.
Italy’s top 100 defense firms operate in both civil and defense sectors, with only 49 percent of their €40.7 billion turnover directly attributed to defense contracts, amounting to approximately €20 billion. This figure marks a 6.6 percent increase compared to 2022. Among the 181,000 employees in the defense sector, 54,000 individuals are exclusively dedicated to defense work.
Leonardo earns 75 percent of its revenue from defense-related activities, whereas Fincantieri derives 27 percent of its turnover from defense contracts. Regarding arms trading, Italy issued licenses for arms imports in 2023 totaling €1.25 billion, with 40.5 percent sourced from the United States. Arms export licenses reached €6 billion, primarily directed toward France, Ukraine, and the United States, highlighting Italy’s active role in the global defense market.
