Euro elite: focus Italy – La dolce vita?

A new generation is revitalising the performance of a trio of Italian leaders committed to remaining steadfastly independent

It’s been a hard decade for Italy, not least for its law firms: the product of a flat economy and relatively few deals. Even before the crisis, the economy had the lowest sustained growth of any OECD country. But there has been a recent renaissance, of sorts, with GDP optimistically predicted to rise by 1.6% in 2016, while concluded deals totalled €50bn in each of the last two years, according to KPMG.

Although few Italian companies made non-Italian acquisitions – just 85 deals worth €10bn – five of last year’s top ten deals were struck by foreign investors, most notably China National Chemical Corporation (ChemChina)’s €8.1bn acquisition of Pirelli, and France’s Vivendi ultimately taking a 24.9% stake in Telecom Italia for €3.1bn. Foreign investors accounted for more than half of last year’s deals by value.

One factor behind Italy’s recovery is a respected prime minister, 41-year-old Matteo Renzi. ‘The credibility that he brings is helping to increase the attention that foreign investors are paying to Italy,’ says veteran dealmaker Francesco Gianni, founding partner of Gianni, Origoni, Grippo, Cappelli & Partners, Italy’s largest independent firm, which saw revenues increase 7% in 2015 to €118m.

Renzi is a break with political gerontocracy, as Stefano Simontacchi, co-managing partner of BonelliErede, comments: ‘It’s not limited to the culture of law firms, it’s a problem with Italy. This is a country where, except for Renzi, the top people are old.’ At 45, Simontacchi, a tax lawyer with a business administration background, has also brought the youthful spirit of reform to his firm, which includes last year’s rebrand.

BonelliErede advised on multiple deals last year, including the Swiss luxury goods group Richemont on the €3.6bn merger of its Net-a-Porter subsidiary with YOOX. Simontacchi, however, is downbeat. ‘Europe, and Italy in particular, will not grow for the next ten to 15 years, that’s the reality,’ he says bluntly. ‘Africa is the future in the next 20 or 30 years, for sure.’

No surprise then that Simontacchi is developing a long-term strategy to exploit opportunities, not dissimilar to the approach of its Spanish best friend, Uría Menéndez, in Latin America. Closer to home, BonelliErede recently hired Massimiliano Danusso, head of Allen & Overy (A&O)’s Italian capital markets practice, together with eight other A&O lawyers, to boost its London offering.

The triumvirate of top independents is completed by Chiomenti. ‘Last year was our best ever, both in terms of turnover and profits per partner,’ says Carlo Croff, the firm’s senior partner, who would not confirm financials, although revenues are estimated to be around €140m. ‘We were involved in all the main transactions.’ Chiomenti advised Pirelli’s holding company Camfin on the ChemChina deal, and Vivendi on the Telecom Italia acquisition.

Croff concedes that his firm’s four-year alliance with Cuatrecasas, Gonçalves Pereira, Gide Loyrette Nouel and Gleiss Lutz was modelled on Slaughter and May’s ‘best friends’, of which BonelliErede is the Italian arm, but with different characteristics. ‘We are independent, and we want to remain independent,’ he says. ‘One pillar of the alliance is that we don’t want, and will never talk about merger. It is similar to other best friendships; the main difference is that we don’t have, and don’t want to have, an English firm. When you embark with an English firm, they tend to dominate.’

Italian firms are themselves often characterised by dominant founding partners, whose overbearing influence persists well into old age. BonelliErede, Chiomenti and Gianni Origoni have each addressed this structural flaw, introducing bye-laws into their partnership agreements for mandatory retirement at 65 – although there are, of course, some anomalies. With the exception of Chiomenti, which is fourth generation, the other two hope that this will preserve future stability when their founding partners eventually retire.

The Euro Elite: Italy	Total lawyers	Total partners	No. of offices
Gianni, Origoni, Grippo, Cappelli & Partners	394	81	10
Chiomenti	301	63	8
BonelliErede	257	55	5
Legance	208	35	3
Nctm	250	73	5

The Italian legal market has been littered with spin-offs and schisms. The most significant is Legance. Founded when 85 lawyers left Gianni Origoni in December 2007, today the firm has more than doubled in size, making it the fourth-largest Italian independent with revenues of €69m. In the €2.4bn merger between US-based Cyberonics and Sorin, the third-largest Italian deal last year, Legance and Gianni Origoni advised on opposite sides.

Gianni says his firm is also advising on a fresh cluster of Chinese €1bn-plus acquisitions. He is not short on enthusiasm: ‘Last year was fantastic. Our margins grew, our billable hours grew, our recovery rate grew, our profits grew – so it was a good year. The first quarter of 2016 was very encouraging, 15% above last year.’

He is equally keen to emphasise a planned shift in mindset: ‘We have to go from “myself” to “us”, and the more we become “us”, the better it is. And our culture should be “us”, and no more “myself”.’

Like Gianni, Legance’s managing partner Alberto Maggi enthuses about deals currently in play that are ‘set to explode’. But unlike his former mentor, he anticipates more acquisitions from US and European buyers rather than from China.

Maggi offers an opaque view on why international firms have not been as successful in Italy as they have in France or Germany: ‘There are specific factors in the domestic market that make it possible for independent Italian firms to continue to lead and withstand the extremely aggressive competition of foreign firms: social, relationship, [and] in some cases, political.’

Against the general trend of shrinkage by international firms in Italy, and in line with its strategy to be ubiquitous, Dentons launched a 21-lawyer office in Milan last October. At 170 lawyers, DLA Piper is currently the largest international player, while Cleary Gottlieb Steen & Hamilton is the most respected by local independents.

As for the leading independents, Maggi says his firm will continue ‘to grow prudently, slowly’. The sentiment is echoed by his counterparts at the big three, although Simontacchi is more upbeat: ‘We will grow; things will get better.’ Meanwhile, Croff offers an interesting window into the future: ‘There will be many changes in the next few years.’ More spin offs? ‘Yes, except for Chiomenti.’ After a protracted period of squeezed margins, 2015 was undoubtedly a better year for Italian firms. Behind their bravado, however, the anxiety clearly remains that things may yet turn downwards again. LB