Italy's legal sphere has been buoyed by rebounding M&A and new work in energy, regulation and litigation. Toby Lewis examines the market trends

Activity levels in the Italian market are now rebounding, after a difficult period triggered by the financial crisis. The recovery is yet to be as robust as in some countries, but Italian lawyers sense their workload is picking up. Francesco Gianni, a founding partner of Italian leader Gianni Origoni Grippo & Partners, says: "The market is recovering, although not as quickly as in northern countries. Yet I spent the last weekend working day and night on a transaction – something which didn't happen last year."

Chiomenti partner Filippo Modulo comments: "Things are moving faster and we have had a general recovery. We have seen a huge increase in activity, particularly in the current second quarter of 2011 as M&A has come back in Italy. Last year we were busy in debt capital markets and restructuring, but now both big deals and medium-sized private equity transactions make it likely 2011 will be a good year."

The most busy firm so far in 2011 for M&A has been Chiomenti by number and value of deals – after working on 11 transactions worth a figure approaching €5.1bn (£4.5bn), according to data provider Mergermarket. Bonelli Erede Pappalardo was the second busiest by value and fourth busiest by number, working on five deals worth €4.3bn (£3.8bn). Freshfields Bruckhaus Deringer has been the busiest international firm, working on six deals worth €4.2bn (£3.7bn).

alberto-saravalleBonelli managing partner Alberto Saravalle (pictured) says: "After a couple of difficult years during which the focus was mainly on restructuring and litigation, the M&A market is picking up again. There are clear signs of improvement and a number of foreign players are looking at the Italian market with interest – especially in the luxury and energy sectors – and several transactions have been completed or announced in the first few months of the year."

The largest deal so far this year has been French luxury group LVMH's €3.9bn (£3.4bn) acquisition of Italian rival Bulgari, with Chiomenti advising Bulgari and Bonelli advising LVMH, according to Mergermarket. Other big mandates included d'Urso Gatti & Bianchi advising French cheesemaker Groupe Lactalis' €3.2bn (£2.8bn) bid for Italian dairy company Parmalat, while multiple firms including Gianni Origoni landed roles on the €1.4bn (£1.2bn) private equity secondary buyout of Italian retailer Gruppo Coin.

However, some advisers still remain pessimistic about the prospects for Italy's economy, which is said to be hitting the fees firms can charge. NCTM executive committee member Vittorio Noseda says: "Not only is Italy doing poorly economically, there is also pressure on fees and higher competition on bids. Overall for law firms the market is much more difficult.

"Yet we have always positioned ourselves in the market very fairly in terms of pricing. Over the last few years we didn't have to decrease our turnover or make significant discount to clients, because our rates were on the lower side of the market compared to competitors. Our fee structure has always been at the bottom of the range, which left us well-positioned for a prices hit."


Hot areas

Hot practice areas in the country, besides reviving M&A work, include advice to the energy sector, regulation and litigation, although some sectors remain in difficulties, including real estate.

Modulo comments: "Real estate has still to come back to the levels of its glorious past. Yet it has to some extent been replaced by activity in the energy sector, which has been really strong. Of course lawyers have benefited from the sector's strength, as it involves multidisciplinary activities such as M&A and local law."

Roberto Casati, a partner at US firm Cleary Gottlieb Steen & Hamilton, says: "Regulation and litigation are the two growth areas in my view. Litigation, I would say, is a weakness of virtually all international law firms except ours. In this country, if you don't have a strong litigation department, people look at you as a less well-rounded firm."

Gianni comments: "Last year 18% of our revenues came from litigation, which is becoming an important source of business. We are going in the direction of firms like Cravath Swaine & Moore and Sullivan & Cromwell, which generate large parts of their revenues from litigation. We have been trying to push anti-cyclical areas."


Key partner moves

Many international firms have seen staff leave, including Allen & Overy (A&O), Simmons & Simmons and Ashurst, in the last year. These departures have come as the financial crisis has caused many international firms to restructure their operations in the country in reaction to falling transaction levels.

Bonelli's Saravalle says: "Medium-sized and foreign firms, typically very active in the sectors most affected by the crisis such as banking, capital markets, structured finance and M&A, have been through a difficult period. This phenomenon has encouraged some partners to step away from these firms."

Noseda adds: "The crisis has increased the level of fragmentation of the market, as the large UK players and also some of our competitors were less able to offer attractive packages to individual partners, who have set up boutiques or joined small firms. This is a return to the traditional Italian approach."

In November 2010 Bonelli recruited UK law firm A&O's project finance partner Catia Tomasetti along with a team of people. A&O partner Paul Flanagan says: "We have definitely had a period of sharp focus on profitability locally. After restructuring we have since had two successful years profitability-wise and are actively hiring and expanding again, although Catia's departure was a loss for us."

He says that many different firms in Italy have suffered departures, but international firms have been more open about the changes they made in the region in response to the recession.

Last year, Simmons closed down its Padua office, with a 15-lawyer team leaving to join Gianni. Ashurst lost Milan practice head Francesco Simoneschi to d'Urso Gatti, while it also opened its second office in the country in Rome.