The instability caused by the Covid-19 pandemic and exacerbated by Russia’s war with Ukraine, with the resulting gas supply difficulties and growing inflation, has affected the Italian legal market as much as anywhere else. This notwithstanding, Italy’s leading independent law firms were able to curb the slowdown in some practices and achieve excellent results in others, most notably through investment in technology and new talent.
Perhaps the most interesting development was the launch, on 1 January 2024, of PedersoliGattai, resulting from the merger of Gattai, Minoli Partners and Euro Elite firm Pedersoli, together with a third group of professionals led by Carlo Montagna and Stefano Cacchi Pessani. PedersoliGattai has ambitions to be an Italian legal powerhouse offering consultancy services in a range of practice areas. The firm hopes, according to founding partner Bruno Gattai, to provide ‘better advice on cross-border deals in M&A and banking and finance’.
As independent Italian firms go from strength to strength, international firms have begun to lose their position in the Italian legal market. While never able to compete with large Italian firms as general practice providers, major US and UK firms have shifted focus to offer specialised advice in specific practice areas, where they are ‘formidable competitors’, according to Massimiliano Danusso, chair of BonelliErede. There is an expectation that this trend will continue, with Italian independents consolidating their practices and dominating the market while international firms become progressively more specialised.
Coming after two very successful years in Italy, ‘2023 was quite challenging for the legal market in general,’ according to the managing partner of BonelliErede, Eliana Catalano – particularly in the M&A space. With the proliferation of geopolitical strife, an increase in interest rates and the continuing high inflation have limited the Italian market.
As a result, ‘M&A transactions were smaller in size but larger in number,’ says Danusso, compared to 2022, with mid-market deals dominating the field. Despite this, certain industry transactions continued to hold fast. ADVANT Nctm found ‘a growing trend for transactions aimed at capturing tech innovation’ in products and processes, according to corporate partner Matteo Trapani. Likewise, BonelliErede saw clients shift their demand to portfolio deals, with an increased popularity in buy-and-sell strategies. Despite this, firms were able to capitalise on ‘a solid pattern of investments and divestments’, according to Gianni & Origoni, seeing excellent results over the past year.
If the M&A market was characterised by a decline in deal values, the previous year witnessed a ‘growth in percentage terms of private equity’, says Trapani, an area that is expected to grow over the next year especially, says Danusso, ‘in relation to disposal divestments from private equity’. While corporate finance and litigation have proved to be stable, continuing to be ‘the main drivers of our market’ according to Gattai, significant developments have been seen in technology and telecoms.
Contrary to expectations, the economic difficulties facing Italy in 2023 did not materialise in a booming market for restructuring and insolvency. An unusually strong financial year for many industries in 2022 meant that companies were more able to stay in the black, though this began to change as the financial year ended in 2023. With a higher-than-normal amount of lending and Covid-era loans increasingly becoming due, firms are anticipating a wave of new restructurings soon. A change to Italy’s insolvency code has also provided companies in financial difficulty a greater range of remedies to restructure their debt and avoid liquidation. Though there is hope that this will benefit the sector, it has been met with some trepidation, dampening foreign investment, as the courts continue to interpret the new legislation and companies adjust to the changes.
2023 saw major reforms to the civil justice system. To access the Next Generation EU recovery package, regulation has come into force reforming the Italian code of civil procedure with the intention of encouraging the use of arbitration services and streamlining the administration of justice. This includes stricter requirements surrounding the impartiality and independence of arbitrators who now have the exclusive power to grant provisional relief where previously this was purely the civil courts’ domain. Regulation has also allowed for the filing of court documents electronically, and enabled remote hearings for civil procedures, to be done more broadly. It is unclear whether the reforms have been effective, with a mixed response from Italian law firms – though some have noticed an increase in the amount of arbitration cases following the changes.
‘2023 was quite challenging for the legal market in general.’ Eliana Catalano, BonelliErede
The current economic environment, technological innovation and sectoral challenges will directly influence the Italian market and, as such, greater market dominance by leading law firms is expected. ‘Size matters,’ says Gattai, ‘and smaller firms could struggle to compete.’ Additionally, AI is beginning to threaten demand for low value-added services from firms, so to compete in the changing market, it is vital that they continue to attract as much high-value work as possible. As such, investing in technology and talent is key. This will be more easily achieved by established law firms who are able to capitalise on their size to seize the opportunities for business growth that technology will bring.
Firms also anticipate increased competition with the in-house legal teams of major companies operating in the country. With an influx of top practitioners to the legal departments of clients, firms have experienced a decrease in demand for general advisers – which can increasingly be handled internally – as companies begin to look for more specific and specialised advice from top firms. To compete, firms will have to increase efficiencies to make their offerings more appealing, either improving fees or providing more sophisticated services.
Though the general picture for Italy remains murky, with changes to regulation and economic uncertainty muddying the waters, glimmers of opportunity shine through. For firms poised to leverage innovation and take advantage of select practice areas bucking the trend, 2024 promises to be an auspicious year. LB