Making the Most of Milan: What’s the Opportunity for Big Law?

Where capital floods in, big law firms follow. Once a city or country has become an investor darling, international law firms will soon look to muscle in on the local market. Such is the case for Italy, which has seen active private equity, private credit and infrastructure markets attract some major law firms over the last couple of years. So, what will it take for the outsiders to bed in and really make the most of Milan?

Lucrative markets don’t form overnight. Italy’s long-fragmented industrial and infrastructure fabric had been crying out for investment, dominated by SMEs without significant capital and ripe for consolidation. SMEs by their nature throw up limiting factors for PE, which long kept international investor interest relatively low.

Now regulatory and legislative tailwinds have made investment in Italy a more appealing prospect. For example, a flood of new money from the European Union to renew the country’s neglected infrastructure and help it catch up with its peers in renewable energy and digital have brought every major infrastructure investor to Milan. The relative undervaluation of high-quality businesses in Italy’s ‘signature’ sectors like fashion, food and technology has also seen international private equity take a greater interest in the country than ever before.

At the same time, Italy has gone in the opposite direction to much of the rest of Europe when it comes to attracting wealthy individuals. Making the rules on tax and domicile more generous to high earners makes Italy a more attractive destination for top private equity investors and their lawyers.

Known for its ‘legacy’ law firms, Italy had historically been difficult for outsiders to break into. Traditionally, the biggest and most lucrative clients in the market—the banks—were well-served by local firms that had grown up with them over hundreds of years. But much like London in the 1990s, the arrival of global private equity to Milan has changed the market quickly. And just as in London 30 years ago, the major global firms have been best positioned to serve the needs of PE in Italy.

As a result of these trends—and the fact that Milan can now be a very profitable market for international firms—Big Law’s Milan offices are increasingly acting with a greater degree of autonomy. Rather than being ‘fed’ work from New York or London, partners in Italy are building their own relationships with PE dealmakers on the ground and winning work of their own. It is another sign of the increasing size and importance of the Milan market that it is now more of a ‘hub’ than a ‘spoke’, both for PE houses and their law firms.

The trick to really making it in Milan is, of course, hiring the right people. The best fits have invariably been those with a connection to Italy. That might mean international firms poaching the best talent from domestic firms. More often, it means bringing in Italian nationals and other Italian speakers working out of offices in global financial hubs like London and New York. For the latter group, having direct experience of working for major PE investors in their biggest markets is a huge advantage—bringing established best practice to Milan is what multinational firms are trying to do.

But before anything else, firms must remember that in Italy, it is as much about lore as it is about law. Understanding the cultural context of doing deals in Italy is a principal, not peripheral, concern.

Having cultural ties to the country is also a significant plus for global firms when vetting candidates. Experience in New York and London can teach you how to do a major PE deal, but it won’t teach you the cultural intricacies of buying a 100-year-old Genovese family business from dozens of the great grandchildren of the founder. Italian dealmaking requires a specific skillset, and it isn’t just a legal and technical one.

It would be a brave person who would bet against Big Law coming to dominate Milan’s dealmaking market. There were sceptics who thought the 'Magic Circle' would always be London’s premier deal advisers, and that ultimately their local knowledge would win out over the US firms muscling in on their territory.

The linguistic and cultural factors involved may make Milan a slightly tougher battle in some regards, but the progress the biggest global firms have made already suggests it is one they are set to win.