Milan: Italy's financial centre

The news that Simmons & Simmons is pulling out of Padua – after the local team moved to Gianni Origoni Grippo & Partners – all but effectively ends the presence of international firms outside of the core Italian hubs.

Simmons’ Padua office is the latest in a line of closures across Italy’s secondary markets as global firms’ streamline their coverage in the historically troublesome jurisdiction. Clifford Chance’s Padua base closed in 2007, Baker & McKenzie’s Bologna office spun-off two years ago and Allen & Overy’s Turin office also broke away for independence.

It is easy to over-exacerbate these closures and drag up the clichés of Italian tempestuousness and Anglo-Saxon ignorance. In truth, they represent the shift in emphasis of international law firms in Italy (and arguably the world) over the past decade. Whereas once there was the desire to compete on full-service mandates, the Anglo-Saxon firms have scaled back in personnel and practice areas in an attempt to out-boutique the boutiques.

Take the A&O example. When the UK firm merged with Brosio Casati & Associati in 1998 there were close to 200 lawyers in Italy. According to the A&O website, this now stands at 75. Linklaters was courting Gianni Origoni with its 200-plus lawyers but, since the alliance ended and the magic circle firm has acted independently, it has built up a team of just 42 lawyers. The same limited headcounts are found in many international firms (White & Case even pulled out of Italy completely in 2008).

As with the exit from the regions, Anglo-Saxon firms seem to be chasing after a selection of high-end premium mandates rather than bulk work. The prime motive has been trying to leverage off investment banking relationships for financings or niche areas, such as project finance. This has broadly been successful, especially for firms like Latham & Watkins and Linklaters. Indeed, while firms like Bonelli Erede Pappalardo, Chiomenti, Gianni Origoni, NCTM and Pirola Pennuto Zei e Associati have been building up to the 300-lawyer mark, the Anglo-Saxons have been going in the opposite direction.

On the first point about regions, it would suggest an acknowledgement from international firms that a provincial presence is largely peripheral. The lucrative mandates from Padua or Turin are limited. Secondly that the presence in Milan and Rome needs to be lean, mean and focused rather than lower-margin full-service work.

It is worth noting that Italy has the smallest European M&A market by value and Italian businesses has a mainly domestic-focused agenda. Companies just do not have the same international appetite as those in Spain or Germany or The Netherlands. This, coupled with a top-tier of bulky national leaders and a plethora of leading boutiques, has meant that there is a limit to the premium work available and most of the instructions originate from Milan.

The last decade has been an interesting and pivotal one for the Italian legal market. The UK firms may have come and saw but they did not conquer. The Italian firms can take comfort from their quality. In hindsight, and despite the expensive lessons learnt however, perhaps Anglo-Saxons firms are glad they do not have to deal with hundreds of lawyers working on small and medium-sized matters during the downturn.