Italian Hub Questions & Answers with Czech Republic

What industrial and commercial phase is the Czech Republic currently experiencing?

The Czech Republic is undergoing a period of transition, marked by a modest economic recovery and a sectoral transformation towards a more diversified and innovation-driven market, with an increasing focus on services. It remains one of the most open economies globally and continues to be export oriented. The country's key economic sectors include the automotive industry, followed by logistics (benefiting from its strategic geographic position), real estate and advanced manufacturing.

Notably, the Czech Republic ranks third in the EU for industrial robotics usage, with over a third of large Czech companies integrating robotics into their industrial processes.

The country is also promoting innovation in emerging sectors such as IT (particularly software development and cybersecurity), electrical and electronic engineering (notably semiconductors), and business support services. Investment in IT and business services has now surpassed traditional manufacturing projects.

How will 2024 end for mergers & acquisitions? What is the outlook for 2025?

The Czech M&A market saw a moderate recovery in 2024 following the difficulties of 2023. While the number of M&A deals decreased by 7.2 %, from 138 to 128, the total transaction value saw a significant increase, rising from EUR 3.67bln to EUR 5.65bln (more than double compared to two years earlier). According to MergerMarket data, the most active Czech M&A sectors in 2024 were industrial products and services, software and IT services, retail, energy, healthcare and construction.

The outlook for 2025 is positive, with an expected increase in M&A activity driven by stabilising inflation and lower interest rates set by the Czech National Bank, aligning with the broader EU trend. These factors are anticipated to boost private equity activity, lower financing costs, and make leveraged buyouts more attractive.

New merger control regulations may influence deal structures but are generally expected to streamline the approval process. Overall, the Czech Republic remains an attractive destination for M&A transactions, thanks to its favourable economic environment and growth potential. The influx of international capital is driving up valuations, making the Czech market increasingly competitive and dynamic.

How is the private equity sector performing?

The Czech private equity sector has been stable, with total investment exceeding EUR 1bln across 34 transactions in the first three quarters of 2024. While strategic buyers dominate the market, private equity accounts for 27 % of M&A deals, focusing on smaller transactions (below EUR 50m) in sectors such as technology, consumer products and life sciences.

International private equity investors are showing growing interest in Central and Eastern Europe (CEE), with cross-border investments rising to 28.4 % of all deals in Q3 2024.

What are the short- and medium-term opportunities in renewable energy?

Investing in green energy appears to be one of the most profitable options, thanks to extensive EU funding, which provides some of the highest incentives in the Union. The Czech Republic is among 13 EU Member States benefiting from the EU's Modernisation Fund, receiving EUR 835.2m in 2024 alone.

Large-scale investments in essential equipment for the green transition—worth at least CZK 2.8bln—can receive grants covering up to 35 % of costs from the Czech Ministry of Industry and Trade. Eligible projects include the production of batteries, solar panels, wind turbines, heat pumps, electrolysers, carbon capture and storage devices, their key components and essential raw materials.

In 2025, solar energy will receive the largest share of government subsidies, followed by broader renewable electricity generation, as the Czech government aims to quintuple solar capacity by 2030.

Meanwhile, subsidies for older solar installations are being phased out. A new "acceleration zone" concept, set to be introduced in the second half of 2025, will fast-track renewable energy project approvals to a maximum of 12 months (for solar and wind energy), while approvals outside these zones will take up to 24 months. Additionally, renewable gas and liquid fuel investments, especially hydrogen production, may receive subsidies covering up to 65 % of costs.

The Czech market's strong potential is further supported by EU alignment, government incentives and investment in strategic infrastructure. Lower industrial electricity and labour costs compared to Western Europe also make the market attractive for investors.

Is there still room for opportunities in the banking sector?

The Czech banking sector is undergoing significant digital transformation, creating opportunities in fintech, online banking and digital payment solutions. The mortgage market is also expanding, as banks aim to channel rising household savings into investments, fostering new investment products and services.

Recent legislative changes have prompted banks to enhance digitalisation and cybersecurity measures, potentially opening doors for specialised service providers.

Has your Prague office worked with Italian companies? What are the most interesting investments for Italians in the Czech Republic?

We have experience advising Italian companies in the Czech Republic. Notably, we assisted CROMODORA Wheels, a company in the automotive sector, and CESI in acquiring a local firm. Additionally, we supported BRIONI and FURLA in their entry into the Prague retail market on Pařížská Street—our equivalent of Via Montenapoleone.

Key Italian industrial investors in the Czech Republic include Brembo, Beghelli, Brazzale, Iveco, Mattoni 1873, Mapei, Marzotto, SIAD and SAB Aerospace. Financial institutions such as Banca Intesa, Ferrero, Generali and UniCredit are also present and active.

Are Czech investors interested in expanding into Italy? In which sectors?

Hundreds of Czech companies operate successfully in Italy across various industries, including aerospace, green energy, digital technology, agriculture and IT. There is a growing interest in industrial digitalisation solutions, including IT services and automation, as well as the food sector—an area where Italy is a global leader.

Are there particularly attractive sectors? Are there tax incentives or state aid available?

Yes, the Czech Republic offers multiple opportunities for Italian investors, supported by tax incentives and state aid.

Technology centres and R&D projects:

• Corporate income tax relief for up to 10 years
• Cash grants of up to EUR 7,800 per job created
• Additional tax deductions of 100 – 110 % for R&D expenses

Business support services (shared service centres, software development, high-tech repair centres):

• Tax exemptions and cash grants

Manufacturing:

• Strategic projects can receive up to 20 % of eligible costs in tax relief and grants, particularly in high-unemployment regions

Entertainment:

• As of January 2025, film and TV productions will benefit from an increased 25 % rebate on eligible costs (previously 20 %)
• Video game development will also receive state incentives from 2025

The maximum incentive per project has been raised to CZK 450m (EUR 18m), making the Czech Republic a highly attractive destination for large international film and TV productions.

As mentioned earlier, green tech investments also present significant opportunities for Italian investors.

How do you see the cooperation between the Czech Republic and Italy?

From our perspective, Czech-Italian cooperation is thriving, with trade volumes exceeding EUR 17bln in 2023 and more than 3,000 Italian companies flourishing in the Czech Republic. The collaboration goes beyond traditional sectors and extends to cutting-edge fields such as aerospace and digital technologies, showcasing the innovative spirit of both countries. In the first three quarters of 2024, trade has already reached EUR 13bln, with an impressive growth in Czech exports to Italy.

This strong economic relationship is further enriched by deep cultural ties, as demonstrated by the number of tourists visiting each other's countries. Whether it's the precision of Czech crystal or the artistry and design of Italy, Czech-Italian cooperation is as multifaceted as it is enduring.

Martin Kubánek | Office Managing Partner | Czech Republic
T: +420 602 209 876 | E: m.kubanek@schoenherr.eu

Daniele Iàcona | Head of Italian Hub | Senior Attorney at Law
T: +40 733 730 119 | E: d.iacona@schoenherr.eu