Once the world's top exporter of jewellery, Italy now has fierce competition from India, China and Turkey where costs are lower and quality is gradually improving to internationally marketable standards.
And all at a time when the longest recession in 60 years has sapped domestic demand and left many Italian firms short of bank credit to fund development and stay afloat.
According to data from Italian goldsmiths association Federorafi, the sector has slumped 28 percent since 2001 to 9,000 firms -- most of which are small family-owned companies unable to compete in a global market.
Corrado Facco, managing director of Vicenza trade fair which is currently hosting VicenzaORO, said the high-end Italian jewellery sector was ripe for restructuring.
"Acquisitions will be part of the game in the years to come as Italy's mainly family-based market restructures to head off global competition," Facco said.
The trend of acquisitions is becoming fairly well established. In 2011, French luxury group LVMH snapped up Bulgari for 3.7 billion euros, offering a 60 percent premium to market prices.
Last year France's Kering bought a majority stake in jeweller Pomellato. Italian private equity Clessidra last year took control of Buccellati to help fund growth in Asia.
Export-focused Italian jewellery is coveted for its design and quality. But foreign competition, a strong euro, and import barriers in potentially lucrative markets like India have taken their toll.
In response to competitive forces, Italy's jewellery industry - Europe's biggest - is increasingly focusing on top-end products where the price of the metal is not the only factor in determining the value of a piece.
Facco says the industry has received attention from China, Russia and the Middle East, as well as the United States, with mounting interest from private equity.
"We've seen acquisitions in recent years of companies like Pomellato and Bulgari and it's not over. We should see something very soon from a Middle East player," he said, without giving further details.
Roberto Coin, famous for its fancy diamond and gold jewellery, has posted double-digit sales growth since 2009 and expects turnover growth this year of 15 percent. It has already been approached by big names.
"A lot of foreigners are looking and we've had a series of offers but are not interested. The door is always open in life but we've already turned down the best. Go figure," owner Roberto Coin told Reuters on the sidelines of VicenzaORO, one of the world's top gold jewellery fairs.
Italy's recession prompted the industry to turn increasingly to exports to boost growth, pinning hopes on a boutique business model to market the Made-in-Italy brand across the globe.
"Small-sized firms used to be a guarantee of personalisation and originality but today it's simply a limit on growth. Many now need, at the very least, distribution partnerships to survive," Stefano De Pasquale, director at Italian goldsmiths federation Federorafi, told Reuters during the fair.
De Pasquale said he was aware of growing interest in the sector from investors from Asia where demand for Italian jewellery is growing.
Many foreign operators are looking for Made-in-Italy brands to burnish their reputation and leave behind their images as cheap mass producers.
But even on the Italian market, where demand fell around 20 percent last year, there is space for growth for bigger players, says the CEO of top Italian jeweller Damiani, pointing to the top multiples LVMH paid for Bulgari.
"Italian players are small and around 90 percent of the jewellery sold here is unbranded. Like in fashion, brandisation will accelerate and open up opportunities," Guido Damiani said.
But change is coming anyway.
"Italy's jewellery sector is old with many businessmen close to retirement age and facing generational change. The sector will consolidate simply by closures," he said.