24 September 2007
It took Julius Caesar a couple of attempts to conquer England. Now, 2,000 years later, Anglo-Saxon firms are launching their own second invasion of the Italian market.
The past few months have seen a flurry of activity as UK and US firms attempt to re-establish themselves on the peninsula after the failed alliances and office splits that bedevilled their first incursions.
In the last month alone Linklaters has prised a partner away from Italian leader Bonelli Erede Pappalardo, DLA Piper has scooped a six-lawyer team from Hammonds Rossotto and McDermott Will & Emery has launched an Italian IP practice with the hire of Francesco Mattina from boutique Gemma Mannino Mattina.
Meanwhile, Lovells has doubled its office space in both Milan and Rome in anticipation of a three-year hiring spree, which it hopes will take the firm up to 140 lawyers from its current 85.
It is an indication that Anglo-Saxon firms are coming back to invest in the peninsula and there is a number of good reasons why now is the right time to do so. The Italian independent firms, which have for so long had a stranglehold on the market, are going through a period of internal strife and division.
First-generation firms, with founding partners still taking active roles in the management of their firms, are finding succession planning more difficult than expected. Members of a talented young generation of 40-something partners, disillusioned with the direction their firms are taking, present a big target for nascent Anglo-Saxon operations.
“Italy’s always been an important market,” says one source. “The difficulties at some of the firms are creating opportunities to come to the market.
Now the market is at a point where it’s good to be a buyer. The bigger firms are suffering a bit in terms of their ideology and with senior people. There’s a question mark over succession. Times are turbulent for the first-generation firms.”
Leading Italian independents Gianni Origoni Grippo & Partners and Bonelli have revamped their leadership structures to try to minimise succession problems, where some younger partners have felt marginalised by senior management.
This summer Gianni Origoni founder Francesco Gianni took up the role of senior partner, while M&A partner Giovanni Nardulli became managing partner.
Forty six-year-old Nardulli is a member of Gianni’s second generation of partners and will be responsible for the day-to-day running of the firm as managing partner. By handing over the reins to a relatively young partner, Gianni is showing confidence in his next generation.
Similarly, Bonelli has put in place a new remuneration committee and elected three young partners – Alessandro Balp, Fulvio Marvulli and Carlo Montagna – to its management board. Corporate specialist Alberto Saravalle has also been appointed to take over from Umberto Nicodano as managing partner.
It is worth noting that both Saravalle and his opposite number at Gianni Origoni have spent time in the US and are New York-qualified, showing a will to broaden their firm’s international horizons.
Meanwhile, Nicodano has joined the compensation committee, along with partners Vittorio Allavena, Fabio Cappelletti, Antonella Negri, Luca Radicati di Brozolo and Claudio Tesauro.
The group will have a mandate to distribute profit more evenly between the 61 partners and give more people the chance to get involved in leadership.
But that has not stopped the Linklaters juggernaut taking on corporate finance partner Luca Picone, the firm’s sixth lateral in Italy this year, giving the firm a total of seven partners in Italy.
“They truly hope that we’re going to have a problem,” says Bonelli finance partner Andrea Novarese. “Everyone, even the Anglo-Saxon firms, will have that problem because they’ve been adopting a similar model in Italy.
They’ve adopted a very Italian approach – depending on individuals as much as we do.”
Picone’s hire illustrates the second reason why Anglo-Saxon firms are growing bolder. The strong pound and growing profitability of UK firms are boosting the attractiveness of partnership there. UK firms are now able to approach partners at firms that previously would have been out of their league.
Linklaters’ profit per equity partner now stands at just less than £1.2m, which is finally on par with the €1.5m (£1.04m)-plus often quoted for the top Italian firms.
UK and US firms have also been able to take advantage of unequal pay structures within the domestic players, where experience often counts more than merit when the profits are being dished out.
“We have a lockstep partnership and won’t adjust terms for an individual,” says Sarosh Mewawalla, co-head of Linklaters’ Italian arm. “We’re in the fortunate position that the firm’s doing well at the moment. In Italian firms the pay isn’t spread evenly across the partners. There are high earners and low earners. It’s quite deceptive looking at earnings numbers.”
Culture shock and a failure to integrate the Italian arms into the wider European picture has always been the main pitfall for Anglo-Saxon firms coming to Italy. Now those same firms claim to have learnt from the bad experiences of recent years. Linklaters’ split with Gianni Origoni, Clifford Chance’s failed joint venture with Grimaldi e Associati and the spectacular collapse of Allen & Overy’s (A&O) Italian banking practice serve as warnings.
“I think it’s very difficult to take on several partners at once,” says Lovells Italy senior partner Leah Dunlop. “It’s difficult to integrate teams of big personalities. You integrate people better if you do it in a focused way, one at a time.”
The Italian partners will also have learnt from these early experiments and now have a greater understanding of Anglo-Saxon firms. It is no coincidence that A&O banking veterans Andrea Arosio, Dario Longo and Davide Mencacci find themselves reunited at Linklaters. “It’s not the first time we’ve taken people with different cultural backgrounds.
We have a long track record,” says Linklaters’ Mewawalla. “It’s not a bad thing, it’s just a question of making sure that it’s recognised and catered for. “We have very integrated practice streams, effectively global rather than geographically located. Once people have got into that culture they become very integrated into the firm.”
Development in Italy would mean nothing without local clients. The personal relationships domestic firms have with their clients have traditionally made foreign entrants wary of the market.
But the development of Milan as a European financial centre and the influx of foreign capital and private equity has shifted the balance in favour of international firms.
“There are still strong relationships between Italian clients and Italian law firms and individuals,” acknowledges Mewawalla. “Those relationships will become less and less entrenched. They’re not going to disappear overnight, but also there’s that other side now, with international clients coming into the markets.
“In the finance sector we’re in direct competition with the Bonellis and Giannis. We offer Italian and international products, whereas they just do Italian law. I think clients will come to us for those types of products and the Italian firms for others.”
But some are sceptical that this offensive will last. Italian firms have claimed that their Anglo-Saxon counterparts have undercut market rates aggressively, particularly in banking, to get a head-start in the market.
“We know what the strategy of the English firms is and we have always been critical about it,” says Bonelli’s Novarese. “Things might change now.
Certainly Lovells, Simmons & Simmons, DLA Piper and SJ Berwin are approaching the market in a very aggressive way. I don’t think this is a long-term strategy for them. They’ll be losing money from day one.”
Even if clients are willing to open up, the best-laid plans are always vulnerable to unpredictable external shocks, such as a global credit crisis or a slowdown in deal activity.
Lovells’ Dunlop admits as much, saying: “I’m not sure the timing is fantastic, given everything that’s going on in the market. If you’re pushing banking and capital markets, it’s not the best time.”
For a long time foreign invaders have been undone by cultural differences, contrasting pay structures and longstanding relationships between Italian partners and their clients.
With these hurdles removed, or at least lowered, UK and US firms finally have an opportunity to get a strong grip on an important market. The principles of careful management will still determine who succeeds and who fails, especially if market conditions suddenly take a turn for the worse. Anglo-Saxon firms are essentially taking a punt.
THE TOP FIVE FASTEST-GROWING ANGLO-SAXON FIRMS
Bryan Cave Headquartered in St Louis, Bryan Cave surprised the Italian market with the hire of Willkie Farr & Gallagher partners Paolo Barozzi and Fulvio Pastore-Alinante to launch its first European office in Milan. Few players in the Italian market had even heard of Bryan Cave before its audacious launch, but a few associate hires later and the firm is ready to go, with 11 lawyers.
DLA Piper Italy chief Federico Sutti has said he has been working with every single recruitment consultant in Italy – and it shows. In the past 12 months the firm has taken on a wealth of new recruits, including a six-lawyer group from Orrick Herrington & Sutcliffe, an IT partner from Carnelutti Studio Legale and the Italian general counsel of international real estate development company Foruminvest.
Linklaters was left licking its wounds after the alliance with Gianni Origoni Grippo & Partners collapsed in 2004. But this year the firm has launched an assault on the market, cherry-picking partners from Pedersoli e Associati, Camozzi Bonissoni Varrenti e Associati and even the impregnable Bonelli Erede Pappalardo, focusing its attention on corporate and finance specialists.
Lovells has burst into life this year in Italy, doubling its office space as it looks to grow from 85 lawyers to 140 on the peninsula. Former Ernst & Young corporate chief Paolo Tanoni was just one of the big names to join Lovells this year. SJ Berwin competition partner Gianluca Belloti followed shortly after.
McDermott Will & Emery
McDermott Will & Emery is in the process of rebuilding its Italian presence following its split from Italian firm Carnelutti last year. The firm started with a threepartner tax team from Trivoli & Associati and then launched a competition practice followed by a raid on Lovells, topping off the run with its first IP partner.