When in Rome...

This week yet another British firm opened an office in Italy.

Jeremy Fleming reflects on the allure of la dolce vita

Italy is undergoing a revolution, according to Anthony Indaimo, co-head of City firm Withers' 20-strong Italian group.

The past six months have seen Italian offices opened by City firms Ashurst Morris Crisp and Norton Rose, and just this week, Lovells.

They are the latest in a spearhead of Anglo-Saxon firms moving into the Italian market.

So what is everyone looking for, and what impact are they having on the local territory?

Mr Indaimo says: 'Ten years ago no major deals could be done in Italy without the say-so of the Salotto Buono (the salon of the great and good).

Members were drawn from among the most powerful families, and from the powerful merchant banks.'

The market was protected, according to Mr Indaimo, by a network of cross-shareholdings which acted as a poison pill on hostile takeovers.

Most of the large companies quoted on the Borsa Italiana (the Milan stock exchange) were owned by private families.

The revolution began, according to Mr Indaimo, with the election as prime minister five years ago of tycoon Silvio Berlusconi, a client of Withers along with the likes of Benetton and MaxMara, whose entrepreneurial style symbolised the general public's disillusion with the ruling Italian political classes.

A number of laws were passed encouraging companies to float and increase the country's equity markets.

Francesco Ago, a partner at leading Italian law firm Chiomenti, based in Rome and Milan, agrees: 'The Italian stock exchange is definitely hotting up.

Listings are increasing.

The Italian and Spanish stock exchanges have said that they might well merge with the English and German exchanges, should they decide to merge.'

The other great watershed in the Italian economy, according to Mr Indaimo, was the takeover of Telecom Italia by Olivetti last year.

This represented, he says, 'an endorsement of the Italian economy by international institutions, without which it could never have happened'.

Alberto Saravalle, a partner at Bonelli Erede Pappalardo in Milan - the law firm which acted for Olivetti on the deal - says the hostile takeover of Telecom Italia showed that Italy is now a mature financial market.

The third crunch factor is Italy's adoption of the Euro: this has prevented the Italian business classes relying on a weak lira to enable them to export easily, says Mr Indaimo.

The lira now needs to gain strength.

Bigger City firms are interested in the privatisations and deals that the new Italian economy will unlock.

But the current atmosphere of liberalisation in the market means that the many big industrial concerns - still wrapped up mainly in private families - are seeking transparent and flexible business vehicles that will enable them to have more control over their assets in the new economy.

That still gives smaller UK law firms such as Withers a chance to put their well-known private client trust expertise to corporate purposes in Italy.Liberalisation has made its mark in a country where the traditional law firm consists of a handful of partners, with the best firms invariably including the services of an eminent professor from Italy's powerful academic community.

Most of the top City firms are in Italy: Clifford Chance, Linklaters, Freshfields, Allen & Overy, Simmons & Simmons, Lovells, Ashurts and Norton Rose are there with offices or associations with local firms.

Several US firms have also moved into the market.Mr Saravalle does not see foreign firms as a threat to the home market.

He says: 'The competition is a good thing; rivals from abroad have modified the market, consolidating an efficiency process which had started but would otherwise have taken a much longer period of time.'

The arrival in the past few years of the Anglo-Saxon firms does not present Italy with a divided legal culture, according to Mr Saravalle.

He explains: 'These Anglo-Saxon firms have a strong reputation for excellence within their own jurisdictions.

We Italian firms are trying to be as organised as they have traditionally been in the US and the UK.'

But he adds that the actual composition of Italian firms does seem to have changed.

Whereas Italian firms traditionally consisted of fewer than ten partners, now firms - such as Bonelli Erede itself - are consolidating and reflecting the new competition in having a range of different departments to meet clients' needs.

One recent development is a spate of office openings in the north-eastern Veneto district around Padua.

Linklaters & Alliance firm Gianni Origoni, Grimaldi Clifford Chance and BBLP Pavia e Ansaldo, have all recently opened offices in Padua.

Mr Saravalle says there are contradictions in this.

'Anglo-Saxon and US firms, and firms like this one, tend to deal in large and complex transactions.

These are undoubtedly based in Rome and and Milan.

What you get in the Italian provinces is smaller - involving litigation and smaller acquisitions - I'm not sure how advisable that kind of move is.

I'm not sure, for example, how profitable the Padua firms are.'

Chiomenti's Mr Ago sees movement into the Veneto market as an attempt by firms to catch onto a booming area: 'Veneto has lots of enterprises, lots of medium-sized companies, and a very entrepreneurial climate.

The problem is that the new technology enterprises there are generally medium-sized, whereas we are upper-sized.'

Behind the surface movement, the liberalisation of the market is also having more deep-rooted effects on the Italian legal profession.

The increase in foreign firms has changed the culture of the Italian market from the bottom up, according to Mr Indaimo.

Mr Indaimo explains that before -- when Italian firms were more nepotistic and the more successful firms relied on the patronage of university professors who act as consultants - professors were frequently recruitment conduits into firms.

'The power of the professors is waning,' he adds.

'Now students are much more competitive, sending CVs out earlier, and keener to get experience.'

Withers itself takes a number of Italian law graduates on work experience; 'now there is much more competition for places', according to Mr Indaimo.

Francesco Ago agrees the culture has changed: 'Firms are employing more young people, and introducing multi-service departments.' Italian lawyers are used to working individually, he says, adding: 'Now there is due diligence work, law firms are required to organise matters; law firms are taking on more of the traditional Anglo-Saxon project management role.

These roles were traditionally performed in Italy by the merchant banks.'

Guido Brosio, of Brosio Casati/Allen & Overy, says the change of culture is most visible in the organisation of the profession 'stimulating emphasis on teamwork and specialisation'.But what of the future - have the mergers reached saturation point? How can Italian firms such as Chiomenti retain their independence? Francesco Ago says globalisation is not going to slow up: 'We haven't yet decided whether to merge and there are certainly advantages to preserving independence; many of the new globalised firms will lose clientele owing to international conflicts of interest, so independent firms might be better-placed.'

But he adds that if the globalisation of business makes Chiomenti less profitable, 'we will probably merge: until then we will continue to be aggressive and efficient'.

Milan-based Freshfields partner Laurie McFadden says there will be other link-ups between English and Italian firms, but forecasts: 'I would expect the medium-sized firms to be next to establish branch offices.

The major players are mostly here now.' Ashurts ended its association with a local firm to set up independently.

So far, foreign influence in the Italian legal market, and consolidation within it, has unsurprisingly been restricted to the profitable north of this economically divided country.

But Anthony Indaimo comments that, with the increase in privatisations, there will be opportunities south of Rome - and especially in Naples - 'as businesses are cleaned up, reorganised and privatised'.

According to Mr Brosio, opening offices in southern Italy is a challenge for domestic and foreign firms alike - no foreign firm has yet opened an office south of Rome.

However, he adds: 'This will change and my personal hope is that this will happen in the not too distant future.

The new economy ought to provide excellent opportunities for entrepreneurial development in southern Italy.' But the major national and international firms will not be racing to open offices there - 'just yet'.