Italian independents have long ruled the roost in Italy, but a slew of recent hires by international firms suggest that things may be changing. Richard Lloyd reports

Italian lawyers have a history of finding international law firms as unpalatable as a drop of cream in their afternoon coffee. Allen & Overy, Clifford Chance, Linklaters, McDermott Will & Emery, and White & Case all bear the marks of high-profile partner departures, failed mergers, and collapsed alliances in Italy.

Most have struggled to challenge the hegemony of the elite independent Italian practices, led by the trio of Bonelli Erede Pappalardo, Chiomenti Studio Legale, and Gianni, Origoni, Grippo & Partners. But for Latham & Watkins and Linklaters, history is no barrier to entry. Throughout 2007, both firms announced ambitious raids on Italian firms to launch outposts focused, at least initially, on winning high-end corporate and finance work. Linklaters made a series of hires from Allen & Overy and local practices Pedersoli e Associati, Bonelli and Camozzi Bonissoni Varrenti e Associati to build an eight-partner team of corporate, finance, and capital markets lawyers. In one fell swoop, Latham took a five-partner team from Bonelli, giving the firm its first Italian-qualified lawyers, split between Milan and Rome, to augment a US and English-qualified team of Italian specialists in London and Brussels.

The Bonelli defections – first to Linklaters and then, in November of last year, to Latham – were the first partners that the Italian heavyweight had lost to rivals. Gianni Origoni suffered an even more dramatic fate the previous year, when two mass defections resulted in more than 100 attorneys leaving to set up two independent practices. In combination, the departures took the shine off some of the leading Italian firms.

They still hold many of the key relationships with major Italian corporations – for example, on the recent attempts to rescue national airline Alitalia, Bonelli and Chiomenti took leading roles – but the US and UK firms' international networks are starting to make a difference in Italy.

"The Italian legal market has changed considerably in recent years," Clifford Chance Italy head Charles Adams says. "Ten years ago, although most of the international firms were here, the market was dominated by domestic practies. Today international firms' brand recognition is much better with Italian clients and they are undoubtedly an integral part of the legal landscape." Even in a downturn, Latham and Linklaters are betting that there's still plenty of space in the Italian market for them.

Italy, perhaps more than any other European market, is the home of the rainmaker – the star partner whose connections extend deep into Italy's major corporations and mid-market of family-owned businesses, and who often lends his surname to his firm. Historically, integrating the Italian rainmaker into the more bureaucratic structure of an American or English firm has proved to be a tall order. Clifford Chance's 2000 merger with Grimaldi e Associati hit trouble with the 2002 exit of a number of senior partners, including Vittorio Grimaldi, who left to form Studio Legale Grimaldi e Associati. Allen & Overy merged with Brosio, Casati e Associati in 1998 only to see name partner Roberto Casati decamp for Cleary Gottlieb Steen & Hamilton in 2004, while Guido Brosio left private practice in 2006.

Partly as a result of messy break-ups like these, local firms still hold a dominant position in Italian M&A. Today Francesco Gianni at Gianni, Origoni; Sergio Erede at Bonelli; and Michele Carpinelli at Chiomenti are at the top of the heap, taking home millions of euros each year. Among them, their firms have picked up lead roles for companies and institutions such as the bank Intesa Sanpaolo; toll company Autostrade per l'Italia; the Italian stock exchange, Borsa Italiana; Goldman Sachs, and the Italian government.

Increasingly, international firms such as Clifford Chance, Cleary, Dewey & LeBoeuf, and Freshfields Bruckhaus Deringer are taking market share. Clifford Chance is noted for a stable of banking clients such as UBS AG and local players UniCredit and Intesa Sanpaolo; Cleary handles capital markets and public M&A for clients such as Italian power companies A2A and Enel; Dewey & LeBoeuf has a string of private equity clients including 3i Group, Apax Partners, and Candover; while in M&A, Freshfields has acted for Sanpaolo IMI and Permira. Nevertheless, it has been a long slog.

Latham's stealth

Latham – in contrast to the Clifford Chances of the world – has never been a frontrunner into European markets, so it is not surprising that the firm took its time in building an Italian presence. But when Michael Immordino joined Latham from Rogers & Wells in 1999 to become the 23rd attorney in Latham's London office, the West Coast firm seemed to have the perfect architect for an Italian practice.

Immordino grew up in Italy before moving to the US to study (he got his Juris Doctor degree from Duke University School of Law in 1986) and then to practice at Willkie Farr & Gallagher in New York. At Willkie, and later at Rogers & Wells, Immordino built a practice advising Italian corporations and banks on international deals. Then, at Latham, he put together a team of a dozen US and English qualified lawyers, helping Italian companies to tap the international capital markets and acting for foreign banks on their Italian deals. Working from a base in London, Immordino and his team counselled clients such as The Carlyle Group on its $1.7bn (£1.1bn) acquisition of the aerospace and defense business of FiatAvio in 2003, and Banca Intesa on its 2007 merger with Sanpaolo IMI to create one of Italy's largest banks.

Such an impressive deal track record raises the question as to why Latham needs to bother with a presence on the ground in Italy. Other high-end US firms with strong international networks have opted to bypass the Italian market, as Weil, Gotshal & Manges has done, or have established close ties with an Italian firm, as Skadden, Arps, Slate, Meagher & Flom tried to do with Chiomenti. (In late October, Skadden and Chiomenti announced that their alliance would no longer be exclusive.)

But Immordino told Latham that he believed the Italian market was changing and Italian clients would need international firms. As local banks such as Intesa Sanpaolo and UniCredit and defence business Finmeccanica have become more international, they have also become more sophisticated in their use of legal services, calling on a range of local and international firms such as Chiomenti, Gianni Origoni, Cleary, and Freshfields. "An Italian firm can no longer do all the work for an Italian client," Immordino says. "Fifteen years ago a local practice could have done 85% of an Italian company's work."

He adds: "Now clients are becoming more sophisticated and relationships are becoming more institutional. It's a long process, but that's where it's trending."

Latham began by shopping for the right Italian attorneys. In June 2007 the firm started talks with a five-partner corporate, capital markets, and finance team from Bonelli, including the Italian firm's co-head of banking and finance Andrea Novarese and executive committee member Fabio Coppola. Immordino had met Novarese when he was a foreign intern in Willkie's New York office in 1992, and had first come across Coppola when both were working on an M&A deal in 1996. Together with three other partners – Maria Cristina Storchi and Simone Monesi in Milan, and Tommaso Amirante in Rome – Novarese and Coppola agreed to swap firms in November 2007.

"We decided that there was an issue over Bonelli's vision of the future and concluded that we had two options: either create our own firm or join a firm with the same values as us," Novarese says. In essence, the partners who left Bonelli wanted to be part of an institution. "We want to build relationships with clients that are relationships of the firm," says Coppola.

"We want to incentivise younger partners and associates to cultivate their own relationships and to participate in the business development activities as a part of their personal and professional growth, to take a long-term view of a firm rather than the short-term results." Although he and Novarese acknowledge that recent spinoffs from Italian firms – such as Labruna Mazziotti Segni, formerly part of Gianni Origoni – have had some success, their long-term future with Latham looked more appealing.

The partners who left for Latham, all in their 30s and 40s, were not part of the senior fabric of Bonelli – but rivals in the market say that they should be a success at Latham. "They're excellent lawyers," says Chiomenti corporate partner Carlo Croff. "They can be stars in the future," says Dewey & LeBoeuf's Italy head Bruno Gattai. Since their arrival at Latham, the new hires have advised on finance deals for Enel (a A25bn [£21bn] global medium-term note programme) and Intesa Sanpaolo (a A100m [£84m] financing agreement for SAME Deutz-Fahr Group), among other clients. Last August, Latham added further strength in corporate with former Gianni partner Antonio Coletti, a capital markets specialist.

Bonelli managing partner Alberto Saravalle shrugs off the departures. Latham's poaching is "a reflection of our success," he says optimistically – although the Latham five weren't Bonelli's only significant loss. In September 2007, up-and-coming corporate partner Luca Picone split for Linklaters's nascent Italian team.

Linklaters' raid

Linklaters began its Italian expansion at the start of 2007, hiring finance, corporate and capital markets partners from corporate boutiques such as Pedersoli and Camozzi Bonissoni. Today the firm has eight partners and 60 attorneys in Italy, while senior Paris M&A partner Jean-Marc Lefevre, who is charged with integrating the Italian practice fully into Linklaters' international network, splits his time between France and Italy.

Like Latham, Linklaters had been playing in the Italian market for a while without Italian-qualified lawyers of its own. As part of a series of alliances with European firms such as Spain's Uria Menendez and the Netherlands' De Brauw Blackstone Westbroek, the UK practice signed up Gianni, Origoni as its Italian ally in 1999. The connection gave Linklaters access to one of the leading local practices, but by 2004 the relationship between the British and Italian firms had unravelled.

"We decided that our strategies didn't coincide – we wanted Linklaters in Italy and they wanted Gianni, Origoni in Italy," says Sarosh Mewawalla, a finance specialist and head of Linklaters Italian practice from 2003 until last July, and now a partner in the firm's Dubai office.

"We had fundamental differences," admits Francesco Gianni, chairman of the Italian firm, who clearly bristled at the prospect of having the direction of his practice dictated by London decision makers. "Linklaters and other UK firms consider that London is the centre of everything, but what is good in London is not necessarily good in the Italian market," he adds.

After the Gianni, Origoni alliance ended, Linklaters kept Mewawalla and US-qualified capital markets specialist Luigi Sensi in a small outpost in Milan to pick up the international end of Italian deals, such as the 2006 initial public offering of Italian scooter company Piaggio. "We always said to the market that we were in no hurry to build an Italian law practice, that we would wait to find the right people and build in practice areas that are consistent with our strengths," Mewawalla says.

That means developing a practice focused on corporate, finance, and capital markets work, picking up work from Italian banks such as Intesa Sanpaolo, Mediobanca, and international banks such as Citigroup and the Royal Bank of Scotland.

Given today's market conditions, it is not exactly the best time to launch a corporate and finance-focused practice, but partner Andrea Arosio insists, "we're small and agile, so still quite busy." And, like Latham, Linklaters has also hung its hopes on a group of partners in their late 30s and early 40s, on the theory that younger partners can better fit into the more institutional culture of a US or UK firm.

"Linklaters' network and its brand offered us the opportunity to do something that we hadn't done before," says Arosio, now co-managing partner in Milan. "Linklaters wanted a bunch of partners who knew each other and would work well together and to focus on core areas where an international firm has an advantage," he adds.

With the collapse in world markets in late 2008, focusing an Italian office on corporate and finance work looks far riskier than it once did. At the time of going to press, though, Latham and Linklaters insist that they have yet to see a significant drop off in their work levels. Linklaters' Arosio points to the work that the firm picked up following the collapse of Lehman Brothers – Linklaters is advising Price-waterhouseCoopers International Limited, the administrators, on the European side of the bank's fall – and further assignments to restructure the debt of leveraged buyouts from the boom years. Neither Latham nor Linklaters has lawyers in Italy who focus solely on restructuring – the hottest practice area these days – but are bringing in corporate and finance lawyers to advise.

Arosio does strike a note of caution: "The issue for us and for other firms is that the pipeline of work looks very uncertain," he says. "Our work levels look good until the year end, but there's a question mark over 2009." At Latham, Immordino says that the firm remains committed to building a full-service practice in Italy, adding that it is still looking for local litigation capability. "Our attitude is the same as the firm's [attitude] everywhere – Latham looks at entering a market on a long-term basis," he says.

Smart thinking

The view among rival Italian lawyers is that, despite the market condition, Latham and Linklaters have at least chosen a sensible option in focusing their offices on high-end transactions, which should keep profitability roughly commensurate with the firms' other European offices. Both firms have also resisted the temptation to recruit older, established star partners who might be more likely to balk at the lack of autonomy and bureaucracy of international firms.

Italy's older, star rainmakers are also accustomed to profit shares far in excess of those pocketed by many top earners in New York or London. In 2008 the Italian government made public the 2005 salaries of Italy's top earners. Among them were Chiomenti senior partner Michele Carpinelli, who took home €4.2m (£3.5m); Francesco Gianni, €6.6m (£5.5m); and Sergio Erede of Bonelli, €11.6m (£9.7m). (Erede holds a number of non-executive directorships at Italian companies, as well as being one of the firm's senior partners). By contrast, in 2005 the top partner at Linklaters took home just shy of $2m (£1.3m) .

For every Linklaters and Latham investing in the Italian market, though, other firms continue to struggle. In late October White & Case announced that it would close its Milan office and pull out of the country altogether, letting go 14 Italian attorneys.

In a statement, the firm said that, in the most recent review of its position in the Italian market, it had decided that reaching "the position in Italy that the firm requires of its operations in any market" would require too steep an investment. The withdrawal came even though the firm had been actively looking for a local lawyer to head its Italian practice.

Of all the international practices, Italian firms typically point to Cleary, which has a strong focus on M&A, capital markets and antitrust, as the firm to have got it right – perhaps they see more of themselves in Cleary's partner autonomy and lack of bureaucracy.