“I do not think there is room in the Italian market for new independent, full-service law firms — there is a sufficient number already.” When Francesco Gianni said this 18 months ago, he was at pains to add: “If you change your partnership agreement to reduce competition between partners in terms of profits, you create a more stable firm.”
Brilliant men can sometimes be wrong, even in
Francesco Gianni, the firm’s senior partner and leading corporate rainmaker, never anticipated this. Led by Gianni’s former managing partner, Giovanni Nardulli, renegades in the new firm settled on the name Legance, with offices in
The split arose from strategic differences on hiring policy, billable hour targets and the need to maintain regional offices outside
The Legance development came hard on the heels of another Gianni split. In February 2006, Labruna Mazziotti Segni was established when 50 lawyers walked out of Gianni. It has since become a successful M&A boutique.
In both cases, the prosaic matter of money may have played a part. As Cleary Gottlieb Steen & Hamilton partner Roberto Casati confirms: “Law practices above a certain size in
So how have Gianni Origoni and Legance fared this year — and does their schism forewarn of further turbulence among Italian law firms?
Gianni Origoni’s new managing partner, Tomaso Cenci, concedes: “It is difficult not to agree with Mr Casati. History unfortunately proves him right: no firm has overcome the first generation problem, even Chiomenti.”
Gianni himself explains: “In
But Cenci suggests that things will be different in the future: “We will survive the retirement of the name partners. With the exception of Gianni, our partners have the same level of productivity. Homogeneity will make Casati’s statement no longer true.”
The firm has certainly been quick to regroup, taking on 45 new lawyers in six months. In February, 10 new partners were made up taking its total to 47. “We will be back to 300 lawyers within six to 12 months — that is our optimum size,” says Cenci.
Next month, there are plans to restructure the firm with the appointment of new heads of practice, who will enjoy greater autonomy. Gianni will operate in three key areas: corporate finance (M&A, equity capital markets and real estate); finance (banking, projects and regulatory financial markets); and litigation (including bankruptcy and intellectual property). “Much power will be delegated to the new heads of practice from the executive committee,” says Cenci, keen to emphasise a commitment to democracy. “It will improve and increase efficiency — Gianni, Bonelli Erede Pappalardo and Chiomenti are still the ones to beat.”
The split has helped Cenci redefine a vision of how he wants to see Gianni develop: “Differences with the Legance guys were impossible to overcome. They had different principles and objectives. We see regional offices as investments — they saw them as costs. The productivity of the firm is a long-term strategy. We want our firm to be an institution like the major Anglo-Saxon law firms. We want Gianni to be around in 200 years. Our former colleagues had a much shorter-term view.”
Over at Legance, short-termism is not the vision on offer. The firm name, which has no specific meaning in Italian, has puzzled some observers. It was deliberately chosen to avoid using the founding partners’ surnames. Restrictive Italian laws still exist, put in place by Mussolini to mark out Jewish lawyers, which theoretically require a law firm to use only the names of practising partners.
‘’Having lawyers with market clout is very important,” argues Nardulli. “Italian clients attach more importance to the lawyers than the brand. We started with 85 lawyers and we are now up to 120 in a shaky market. Our partner leverage is one to four, compared with some firms’ of one to six or greater, and we want to keep it that way.”
Remuneration among the 25 partners is typical of an Anglo-Saxon model: 85% of the profits are shared by lockstep with no barriers; 15% is distributed according to performance. They do not want to become one of the largest firms in
Legance has hired professional management from a banking conglomerate to run every aspect of the firm that is non-professional, explains Nardulli. “The cultural challenge is that partners, especially those in charge of management, need to step back. The firm is now better managed and partners are free to devote their energy and attention to clients.” As managing partner, Nardulli spends only 10% of his time on management.
Other key Legance partners include former Gianni executive committee members Alberto Giampieri, Filippo Troisi and Bruno Bartocci. Also on Legance’s new executive committee is former Gianni partner Alberto Maggi.
So how have they done so far? Short-term performance in league tables can be notoriously erratic. Nevertheless, the new group has manifestly been successful in developing significant business. A look at Mergermarket data for the first half of 2008 shows that, in terms of value, Legance ranks alongside the two Italian M&A powerhouses, Chiomenti and Bonelli. Only Linklaters stands as a clear winner above all-comers. In the number of deals, Legance is second only to Chiomenti. In both value and volume, Gianni ranks some way below.
The biggest Legance deals include Air
Among lawyers, opinions vary on the split. The advent of Legance as a strong new competitor in a difficult market — where yields are falling and deals are becoming scarce — provokes some nuanced responses. Behind praise lies fear.
Commenting on the split, Fabio Coppola — who recently left Bonelli with four other partners to head up Latham’s Italian practice — says: “Gianni needs to rebuild the generation between 35 and 45 — that is very challenging. It will not be easy.” He is, however, encouraged by the group of lawyers who have formed Legance: “They are excellent. I am convinced they will be successful in their new adventure. From their years at Gianni they have built outstanding relationships with clients and foreign firms. Francesco Gianni has always been very good at that. His was the first firm to market itself effectively with the
Enrico Zattoni, partner at Pedersoli, believes that the split had “a tremendous impact on Gianni, but the friction was so great that he had got to the stage of not being able to work”. Legance, he suggests is very aggressive: “Some may ask why they did not join a major international firm. Italians are well known for being divisive and individualistic. Splitting is usually a very bloody affair.
“What I have seen with the Gianni split is a different outcome. Now we have two law firms in their own right: both powerful, both cohesive.”
Meanwhile, Stefano Sutti, managing partner of Sutti, believes that Gianni appears “more far-sighted than the young Turks at Legance, who seem to be concentrating on more specialised, high-margin work and foregoing territorial coverage and critical mass”. Gianni, he argues, is recovering and bouncing back, while Legance has made “less of a splash than they hoped for”.
Alberto Saravalle, managing partner of Bonelli, often sees Gianni, Legance and Labruna on the other side in deals, and when competing for work. He hopes that the new firms originating from the spin-offs of Gianni will not eventually be “seduced into merging by foreign sirens”.
Bonelli, arguably
Among several wealthy lawyers whose earnings were then re-published by Italian newspapers were Michele Carpinelli, star dealmaker at Chiomenti, who earned Ä8m (£6.3m) and Erede himself, who was paid Ä11m (£8.6m). These figures dwarf the earnings of every magic circle partner in
“It is a major problem we have in this country,” says Zattoni. “Such a difference between junior and senior partners makes them leave.” Cleary’s Casati agrees: “Such remuneration is totally out of line with what the market indicates. It means some of the partners below are not making enough. It is not conducive to a long life for the partnership.”
Maurizio Bernardi, managing partner of Agnoli Bernardi, believes that the move of five lawyers from Bonelli to Latham was caused in part by the huge diversity in partnership remuneration.
Fabio Coppola disagrees: “Sergio Erede is the best corporate lawyer we have in
According to one lawyer, “the five partners who left Bonelli, the most powerful and richest Italian law firm, departed with dignity”. It enabled Latham to make a quantum leap. Of their 31 lawyers, five are US-qualified and 26 are Italian-qualified.
Coppola makes it clear that they want to be a full-service firm, operating with at least 80 local lawyers. Casati
says that 100 is the magic number of lawyers for critical mass in
The five-year alliance between Gianni and Linklaters ended in 2004 when the Italian firm rejected the merger option. Linklaters has been aggressively hiring partners and is still thought to be interested in a deal with Labruna Mazziotti Segni, among others.
And the ultimate question for local firms: quo vadis? Coppola believes Italian independents will need to find a stable alliance with foreign law firms to compete. Zattoni suggests there will be major mergers and new splits and spin-offs from major firms. Several lawyers anticipate more US firms like Latham trying to emulate the local success of Cleary in the next five years, forging links with the likes of Legance — possibly even with Gianni.
In the sometimes Machiavellian world of Italian law firms, one prominent lawyer summarises the common mood: “We are all Gianni’s boys, in a sense.”
ItalyJune2008
