English empire builders plan Roman conquest
4 May 1999
24 September 2007
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In the first few decades of the first millennium, the Romans completed their conquest of Europe by marching into England.
Now, in the last few months before the third millennium, many English firms are looking towards Italy as the next desirable outpost in the map of Western Europe.
Linklaters, Eversheds and Cameron McKenna are just three of the leading UK firms planning to set up Italian links, while Clifford Chance, Allen & Overy, Simmons & Simmons and Osborne Clarke are among those already there.
But although the Italian market offers great opportunities in this time of immense cultural and financial change, firms which are now established in the country should pause for thought before proclaiming veni, vidi, vici.
The Italian market is booming, as Francesco Gianni of Gianni Origoni & Partners, a top five firm based in Rome, testifies.
"Italy is one of the largest economies in Europe," he says, by way of explaining the English invasion.
"It's a wonderful bonanza at the moment. There are so many transactions, not only privatisations but deals like Olivetti, bank mergers and the restructuring of the service sector."
He adds that Italian companies are becoming more international and dynamic and this is leading to an increase in demand for legal services.
Faced with the armies of lawyers that international firms can typically throw at a deal, Italian firms have had to grow fast. Three top Italian firms, Erede e Associati, Bonelli e Associati and Pappalardo e Associati, merged last month to create a 22-partner, 100-lawyer firm - a giant by Italian standards. The new firm is now believed to be on the lookout for an international merger partner.
Traditionally, Italian firms have tended to do the opposite - they split rather than merge. "Five years ago there were very few firms with more than about 10 to 15 lawyers," says Laurie McFadden of Freshfields' Milan office.
"There were only about 20 firms in the whole of Italy with that sort of number. Now we have 55 lawyers in Milan and 18 to 20 in Rome."
Merger discussions are now taking place between Croze Radice & Zambelli, part of the Osborne Clarke network, and Carnelutti's two branches, which could create Italy's largest law firm, with around 100 partners, by the end of the year. There are also rumours that Pavia e Ansaldo is in merger talks with German and French firms.
But McFadden believes that even the smallest firms should survive in the immediate future. "There is a lot of legal work about and there is no need for firms to dive into merger mania," he says.
"The call for lawyers is on the up and clients are in- creasingly recognising their worth."
The international influence is also starting to move the structure of local law firms towards an Anglo-Saxon model.
In the past, Italian firms worked along similar lines to barristers' chambers in the UK, with members paid according to the amount of work they brought in. This meant that the newly qualified lawyers scraped through on a pittance - around L1m (around u400) a month, according to Alberto Croze of Croze Radice & Zambelli. It was only when a lawyer was made partner that their salary crept up to anything approaching a UK lawyer's earnings.
One partner tended to dominate each practice and profits were shared out very unevenly. According to one Italian lawyer, in many firms the leading partner would take up to half the profits and, if he or she left, the firm was likely to fold.
Italian lawyers say this culture of leadership by one dominant personality is on the way out. In particular, the link-up of well known rainmakers Franco Bonelli and Serge Erede, and Vittorio Grimaldi's association with Clifford Chance, are viewed as signals of changing times.
Part of the boom has come from privatisations and the listing of medium-sized companies on the newly liberalised stockmarket.
Alasdair Neil of Simmons & Simmons Grippo says that flotations of family firms are also an expanding area: "A lot of companies have decided to float. We have done three flotations in a very short period of time, which has created a very interesting market, with companies being able to raise money locally."
The number of flotations looks set to increase, he adds, as founders approach retirement, leaving the family wondering how the company should be financed and run in the future.
Gianni backs this up, saying that where five years ago there would have been about five initial public offerings (IPOs) on the market, his firm is now handling five IPOs by itself.
Nevertheless, although in Germany Anglo-Saxon firms have benefited from a public perception that they have greater expertise in handling stockmarket work, Neil admits this is not necessarily the case in Italy.
"Our London office expertise is very useful but Italian lawyers are extremely able and perfectly capable of handling flotations," he says.
There is also a note of caution from Baker & McKenzie's Rome-based Aurelio Giovannelli for incoming firms hoping to capitalise on the flotation flurry.
"There are only about 400 companies currently listed on the Milan stock exchange, so the number of flotations can be counted on the fingers of two hands," he says.
"The market is opening up compared with five years ago, but it is nothing like 18 years ago in Britain with the Thatcher privatisations."
With the balance of power in the Italian government currently in the hands of former communists, the market is not going to liberalise overnight, although Giovannelli says that the pace of change is still quite impressive.
But, when it comes to wowing the Italians with size and cross-border capabilities, the Anglo-Saxon firms are fighting an uphill battle.
Croze says that, when it comes to winning work from the Italians, the British have two major problems.
Firstly, Italians are traditionally reluctant to go to lawyers as a matter of course, using them only when a problem has arisen.
Freshfields' McFadden admits that such an attitude exists but says it is slowly changing. "People used to use litigation only when they really had to, for major transactions, but they are now using lawyers more frequently," he says. "A lot of people who used to do without lawyers now realise that they need to involve lawyers earlier in their proceedings than they did before."
Secondly, once companies can be convinced to negotiate deals with a lawyer by their side, they will go to the lawyer that they have always used, according to Croze.
"The traditional family companies are scared to go to US and UK firms because they don't want to spend a lot of money on legal fees and are worried about the sheer scale of the firms," he says.
"While international firms can offer a standard service and expertise in every area, that has to be countered against the personal service given by smaller firms, which is the way the Italians like it."
So which Anglo Saxon firms do the Italians fear and admire? Clifford Chance is rated by both Francesco Ago of Chiomenti and Croze because it is essentially a "domestic practice" using a majority of Italian lawyers and competing with domestic firms particularly for banking, capital markets and privatisation work. Freshfields' arrival in 1996 caused a stir, and the firm is now regarded as level pegging with the leading native firms and Clifford Chance.
Allen & Overy is viewed by some as having a promising future within project finance but local lawyers say it has yet to carve its niche at the top of the market.
But the message from Italian onlookers to an incoming practice wanting to make an impact is: "When in Rome do as the Romans do." The Italians are not impressed by sheer weight of numbers and appreciate the personal touch from their lawyers.