Visiting Milan at the end of 2019, it was striking that a map of law firms’ office addresses drawn up just the year before was no longer reliable: too many had moved, taken up larger premises… or no longer existed.
Finding our way to meetings with 20 partners at domestic and international firms, an unusual buzzword was emerging: consolidation. ‘There are too many Italian firms and there is not space for everyone, so they need to consolidate,’ argues one Milan-based partner of a foreign firm.
Such dynamics would be too obvious for comment in most other Western jurisdictions. But in a market for decades defined by individualism, fragmentation and unstable hierarchies, such developments mark a significant turning point.
If the country’s top three players – BonelliErede, Chiomenti and Gianni, Origoni, Grippo, Cappelli & Partners (GOP) – have long been in the (sometimes faltering) process of detaching their image from their founding partners, the news is that there is now a much broader group of domestic firms with plans for their future. Meanwhile, the boutique model, for decades the dominant one for Italy’s profession, has been falling from favour, surviving only in a few specialist sectors (see box).
International firms will be keeping a close eye on such developments, since local clients’ focus on individuals over brands has been one factor that traditionally made the market challenging for foreign advisers. Will their Milan branches fare better in the 2020s?
Some are hopeful that the long-term trends are with the foreign law firms, however troubled their history has been. As Dentons’ Italy head Federico Sutti notes: ‘Multinationals use panels and panels use international firms, so they are taking market share off Italian firms.’
The straightforward path
In what has been dubbed ‘the deal of the year’, Italy’s largest and highest-grossing law firm BonelliErede merged last July with 70-lawyer rival Lombardi e Associati, expanding its headcount to about 550.
Few firms were as illustrative of Italian law’s resistance to institutional brands as Lombardi. Founded in 2004 as Lombardi Molinari e Associati, it became Lombardi Molinari Segni in 2013 after a three-partner team led by Antonio Segni joined from Labruna Mazziotti Segni; then it changed into Lombardi Segni after founding partner Ugo Molinari left in 2016 to launch his own boutique; and finally reverted to its last name when Segni himself quit in early 2019. Such stories were hardly exceptional in a country where firms were made and broken at the whim of a small group of veterans.
‘Multinationals use panels and panels use international firms, so they are taking market share off Italian firms.’
Federico Sutti, Dentons
Indeed, the founding partners, still active at both BonelliErede and Lombardi, were the driving forces behind the merger. Sergio Erede and Giuseppe Lombardi had already considered uniting their firms more than a decade ago. But while back then the deal collapsed partly because they could not agree on the firm’s name, this time BonelliErede was in a clear position of power, being more than five times the size of its merger partner both in headcount (almost 500 compared to 70) and revenue (around €160m compared to around €30m).
More importantly, the merger signals a shift in a practice area that is set to acquire increasing importance in a country where the transactional market is getting tougher: litigation. While contentious work has for decades been dominated by small firms with a handful of strong names gathering small teams around them and running the show, the merger added 40 lawyers to BonelliErede’s litigation team, taking it to around 100. The firm’s president, Stefano Simontacchi, is bullish: ‘There were only two Italian firms that were tier one in litigation. They are together now. It’s almost impossible for anyone to catch up. The merger makes us invincible in a key countercyclical practice.’
External observers are predictably more sceptical, with several pointing to the fact that client conflicts will be an obvious issue for a full-service firm trying to grow its contentious practice quickly.
‘There are too many Italian firms and there is not space for everyone so they need to consolidate.’
Milan-based partner of a foreign firm
But BonelliErede is hardly the only big firm expanding its contentious ranks. GOP now boasts around 70 litigators; Chiomenti has 40 and senior partner Francesco Tedeschini says there is ‘room for growth’; even PE specialist Gattai, Minoli, Agostinelli & Partners focused much of its efforts last year on building a 20-strong disputes team under founding partner Luca Minoli, adding Lombardi’s former protégé Filippo Rossi and absorbing ten-lawyer boutique Mazzoni Regoli.
There are other reasons why the BonelliErede-Lombardi merger is significant. Clearly, the deal had some fallouts, with more than 20 lawyers parting ways with the firm. But whereas once departing partners would have set up their own shops, this time they joined established firms – with Segni and his 14-lawyer corporate team returning to GOP and Gattai Minoli picking up around a dozen.
The cliché that Italian firms are unable to survive their founders might soon be history. Indeed, Sergio Erede and GOP’s founder Francesco Gianni still carry a sizeable portion of their firms’ business and client relationships. But it is becoming increasingly hard to imagine an existential challenge to their firms when they finally depart.
While BonelliErede is now well past the 500-lawyer mark, GOP is not far behind at 490. ‘On average, our revenue does not rely on one single client for more than 2% or a single practice for more than 35%,’ says GOP’s co-managing partner Rosario Zaccà.
Adds Simontacchi: ‘In a slowly-growing Italy and a static Europe, we could either scale back and only do high-end work, or expand. But if we don’t give young people more opportunities to develop we cannot get the best ones.’
Chiomenti’s team is smaller at 341 lawyers but its ability to survive its founder has never been in question. Half-way through his first three-year term, Tedeschini represents the fourth generation of leaders at the 72-year-old firm. In January, Chiomenti added a seven-lawyer finance team from Orrick Herrington & Sutcliffe, led by partner Gianrico Giannesi.
While Italy’s big three all bill well over €100m, the clearest sign of the new era is what is happening outside of this group. Where there once was an indistinct bunch of small-ish challengers and one-practice specialists is now a series of respectable names progressively absorbing smaller boutiques around them.
Legance, which launched as an 80-lawyer spin-off from GOP in 2007, has passed the 250-lawyer mark with revenue over €90m in 2019. Highlights in 2019 included launching a three-lawyer white-collar business through the takeover of boutique Bertolini Clerici; hiring Linklaters Italy tax head Luca Dal Cerro and Orrick energy partner Cristina Martorana.
‘There were only two Italian firms that were tier one in litigation. The merger makes us invincible in a key practice.’
Stefano Simontacchi, BonelliErede
Turning 20 this year, Nctm also has 250 lawyers and topped the Mergermarket league table by deal count in 2019.
Arguably the most successful new entrant in the market in the 2010s, eight-year-old, 130-lawyer Gattai Minoli has moved from a PE boutique into a transactions-focused full-service firm turning over more than €30m. ‘Our model is to assist both funds buying companies and the companies they acquire,’ says the energetic managing partner Bruno Gattai. ‘We tend to do everything for portfolio companies: labour law, IP, IT, fiscal law, litigation, antitrust.’
Its client roster includes CVC, Bain and Clessidra; its relationship network features US giants Weil, Gotshal & Manges, Kirkland & Ellis and Milbank.
Pedersoli has likewise been transforming itself. Founded in the 1950s as a litigation boutique, it is now full service, having added 30 lawyers over the last two years to reach 154. At the end of 2019 it turned heads locally by bringing back home well-regarded corporate partner Giovanni Pedersoli from Linklaters after 12 years. Son of founder Alessandro and brother of current head Carlo, he returned to his family’s firm partly to use his experience from Linklaters’ well-run Milan arm in Pedersoli’s journey from a family-run organisation into an institution. ‘The challenge is maintaining the boutique approach while understanding that the firm is so big and complex that it requires some management and organisational structure,’ reflects Pedersoli. ‘I hope I can help with that.’
The firm, which can count on longstanding relationships with banks including Intesa Sanpaolo, finished second in Mergermarket’s league table by deal count and third by deal value in 2019 and acted on one of the most recent multibillion-euro deals in Italy, advising the shareholders of pharma group Recordati on its €3bn acquisition by a CVC-led consortium in 2018. Its much-vaunted Turin branch fields well-connected lawyer Carlo Re.
Finally, transactions-focused Gatti Pavesi Bianchi has, since its 2005 launch, doubled its headcount to around 100 lawyers and almost tripled revenue to nearly €40m. Recent additions include a six-lawyer labour team from GOP in 2018 and a four-strong finance group from Paul Hastings.
A forest dark
Where does this leave the Italian branches of UK and US players? The Italian market has never been kind on foreign advisers, and 2019 was no exception. Paul Hastings left the country after 14 years, while Linklaters, Latham & Watkins and Freshfields Bruckhaus Deringer saw prominent departures.
Nor is the Italian economy in its best shape. After the country fell into recession in the last quarter of 2018, growth was flat in 2019. Ominously, several marquee deals fell through, with Permira withdrawing Milan-based healthcare group Althea from the market and BC Partners stopping the sale process of Italian restaurant chain Old Wild West following the populist government’s proposals (never implemented) to ban Sunday opening of shopping malls.
With almost no deals over €1bn, BonelliErede topped Mergermarket’s league table by deal value in 2019 despite a 68% drop to $11.8bn. For context, in 2018 Freshfields finished first at $55.6bn.
In a country dominated by small and medium-sized enterprises, many companies are sceptical of the highly-regulated capital markets. Needless to say, the political sphere remains chaotic, the government unstable.
But then the Italian legal industry has long outperformed the country’s economy. Rather than making Italy uninhabitable to foreign counsel, consolidation has been evident with international firms as well.
Although the exits of Pedersoli and Dal Cerro to two growing domestic firms stung, they were not enough to dent the image of Linklaters as leading UK firm in the country. The hire of 69-year-old rainmaker Roberto Casati from Cleary Gottlieb Steen & Hamilton in 2018 has, according to Italy head Andrea Arosio, delivered, bringing ‘gravitas and contacts’ to its corporate practice and moving sizeable clients, including energy group Saras and insurance company Assicurazioni Generali.
Linklaters’ 120-lawyer Italian practice, which in 2018/19 turned over around €45m, includes other prominent names in corporate partner Giorgio Fantacchiotti and capital markets specialist Claudia Parzani. The firm also rebuilt its tax practice with the hire of Roberto Egori from Freshfields.
Among the US advisers, Latham’s and White & Case’s relatively young Milan outposts of around 50 lawyers each have quickly climbed up the pecking order. Prominent banking partner Andrea Novarese and corporate partner Maria Cristina Storchi moved from the former to the latter last July, reuniting with their former colleague Michael Immordino, who left Latham’s Italian practice three years after its launch to found White & Case’s Milan arm in 2011.
Latham’s high partner turnover has become almost a running joke among local lawyers, and even its top rainmakers take pride in not hanging pictures on their office wall as a reminder that they might have to leave at any time if they do not deliver. But the revolving doors have spun both ways, with the US firm in 2017 bringing across Gattai Minoli’s corporate partner Cataldo Piccarreta and his trophy client Bain Capital.
Latham’s longstanding key client Carlyle allowed the firm to put its name on one of the few large Italian deals last year, with well-regarded PE partner Stefano Sciolla leading the team advising the sponsor on the €1bn acquisition of manufacturer Forgital.
Elsewhere, some mid-market players have been growing fast. In less than five years since its 2015 launch, Dentons has gone from nine to 130 lawyers turning over €40.7m in 2019, which Italy head Sutti says is the right size for a full-service offering. Fieldfisher launched in 2016 and now fields more than 300 lawyers across five offices, in 2018 hiring Chiomenti’s Carmelo Raimondo as finance head.
The last few months also saw some new entrants, as Greenberg Traurig merged with 50-lawyer Italian firm Santa Maria Studio Legale last July and Squire Patton Boggs launched a four-partner Milan base in January.
The journey ahead
Legal Business’ analysis of the Italian legal market two years ago (‘And yet it moves’, LB283) concluded that it was time to abandon the view of Milan as impenetrable to foreign firms as the market gradually matured and modernised.
The good news is that the names mentioned in that analysis – Linklaters and Latham in particular – have largely fulfilled their promise, moving ahead of the rest of the international pack and showing that Italy can deliver to foreign advisers with a plan.
But this window of opportunity is closing fast: a number of domestic firms have, over the last two years, made decisive moves to consolidate, meaning hierarchies are becoming more entrenched.
With the lateral market unlikely to slow any time soon, there is little doubt that the streets of Milan will remain the setting for many colourful stories. But the map of their home firms has become a lot clearer. LB
marco.cillario@legalease.co.uk
Endangered or thriving? The case for Italy’s surviving boutiques
Once the norm in Italy’s legal market, the boutique model has received several reverses lately, with more than one small firm absorbed into larger ones, particularly in litigation. And yet there is evidence that one-practice firms built around an influential leader can still thrive, at least in two sectors: tax and employment. ‘Tax is not a sector that suffers from crisis too much,’ says Guglielmo Maisto, whose 29-year-old firm, Maisto e Associati, fields 60 tax specialists billing €31.7m. ‘Our size has allowed us to create sub-specialisations,’ he adds, pointing to areas including M&A, tax litigation, private clients, real estate, sports and entertainment.
The list of sizeable tax-focused firms also includes Ludovici Piccone & Partners and Tremonti Romagnoli Piccardi e Associati, while the employment scene fields prominent boutiques in Toffoletto De Luca Tamajo e Soci and LABLAW.
Founded in 1925 by current managing partner Franco Toffoletto’s grandfather, the 100-strong Toffoletto doubled its revenue in a decade to €22m. It fields eight Italian offices and an international alliance of 60 member firms across 57 countries called Ius Laboris.
The question is how long the boutique model will survive should some of the larger firms invest heavily in these areas. But Toffoletto makes a strong case: ‘Why would a client come to us instead of a multi-practice firm? Because we are better and cheaper compared to the big firms. They have smaller practices that cannot do what we do.’