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Parmasplat! The people of Italy eat, drink and live Parmalat, the food conglomerate. While the collapse of its global empire casts a shadow across the country’s economy, a diverse array of law firms have had the opportunity to display their corporate clout. In Italy, it’s not clever to be big, it’s clever to be rich. Parmalat is a cash cow CAMILLA SUTTON
PARMALAT’S MELTDOWN AND reinvention makes for high legal drama. The now infamous arrest of former Pavia e Ansaldo partner Gian Poalo Zini took place on New Year’s Eve 2003. Then came the ignominious police raid on the New York office of his firm Zini & Associates. The press had a field day with the €1m-a-month fee that name partner Francesco Gianni of Gianni, Origoni, Grippo & Partners was reported to be billing the extraordinary commissioner Enrico Bondi for his restructuring advice. As Legal Business went to press, it was revealed that Pavia e Ansaldo itself has been named as a defendant in a Parmalatrelated US securities suit. This is Italian drama, replete with big names, big egos, big money – and some fairly small law firms… Esteemed professors, traditional Italian boutiques, Italian lawyers trained by AngloSaxon firms, and Brits and Americans seconded over to Italy have all stepped up
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to the Parmalat mark. All are jostling for position in a market which is in as much flux as, well, it’s always been. Here, Legal Business examines the fallout from the collapse of the dairy giant and considers the changing landscape of one of Europe’s more volatile legal markets. The Parmalat scandal hit the headlines in late 2003 when the Parma-based food conglomerate, one of Italy’s largest companies to be listed on the Milan stock exchange, was declared insolvent after defaulting on a bond repayment. Hailed as Europe’s Enron, the ramifications were inevitably farreaching. Parma’s football club, now subject to the extraordinary administration procedure, is languishing in the relegation zone of Serie A, having had to sell its most famous players, Adriana Mutu, Hernan Crespo and Adriano, allegedly as a result of the crisis. Last June the number of companies that were subject to proceedings related to Parmalat was 22. With international and domestic parties involved in criminal proceedings, civil litigation or insolvency claims, all clamouring for retribution or recompense, it is hard to find a law firm in Milan that hasn’t been touched or instructed as a result of the scandal. Bankruptcy administrator Enrico Bondi’s task is to sort out the mess and get Parmalat back on its feet. His
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> choice of legal counsel has, unsurprisingly, been domestically led. ‘Parmalat is very much an Italian story,’ explains one Italian in-house lawyer. ‘It was a multinational that all the local banks were involved in. It’s no wonder that domestic lawyers were appointed to deal with the bankruptcy; it’s part of our culture to want local players to sort it out.’
PARMALAT: BONDI’S TEAM Lawyer Francesco Gianni Umberto Tracanella Giuseppe Lombardi Marco de Luca Prof Maffei Alberti
Role calls The inimitable Francesco Gianni has had the greatest role. He and his team from Gianni, Origoni, Grippo & Partners spent the first six months of 2004 creating a comprehensive restructure plan that was presented in July. ‘We dealt with all the restructuring issues,’ he explains, ‘including tax and employment implications,
Advising on... Restructuring plan Settlement with creditors Litigation and claw-back Criminal law Insolvency issues Source: Legal Business
competition and bankruptcy law.’ (Such intimate involvement was cited as a contributing factor to the split with Linklaters, ever mindful of its global investment bank constituency.) Other individuals on Bondi’s team include Umberto Tracanella, a Milanese sole practitioner who sits on Parmalat’s board of directors and is dealing with the settlement with creditors. Also instructed is Giuseppe Lombardi of Lombardi, Molinari e Associati; he’s advising on the litigation and claw-back elements of the case. Criminal law expert Marco De Luca is also involved, as is Professor Maffei Alberti from Bologna, who is dealing with the insolvency. Bruno Colva, formerly inhouse at Fiat, is general counsel for Parmalat itself. The conglomerate instructed Weil, Gotshal & Manges last December. Chris Mallon and Marina Goldstein from London and New York, respectively, advised on the restructuring. Roberto Bonsignore, partner at Cleary Gottlieb Steen & Hamilton in Italy, advised Close Brothers on its opinion on the fairness of the labyrinthine restructuring plan. And at the time of going to press, the
decision over exactly which creditors will convert their debt to equity – and therefore become shareholders in Parmalat’s reincarnation – was being decided. Bondi wants to list the new company early in 2005. The survivor business, Assuntore SpA, will inherit the assets, including the benefit of any successful litigation claims, of Parmalat.
Picking up the pieces Meanwhile, the fallout from the company’s collapse has been extensive. In Milan, the market manipulation investigation against various former managers of Parmalat, including former CEO Calisto Tanzi, Bank of America and the auditors Grant Thornton International (now called Italaudit) and Deloitte Touche Tohmatsu, is complete. The investigation is still ongoing in respect of other banks such as UBS, Deutsche Bank and Morgan Stanley. In Parma itself, further Parmalat-related criminal proceedings include investigations into the illegal financing of political parties, crimes against retail investors and fraudulent bankruptcy. Civil litigation has spiralled – everyone is suing everyone. Hundreds of lawyers are representing thousands of investors who are claiming damages as a result of the bankruptcy. Bondi has issued proceedings against the auditors, Citigroup and Bank of America, as well as a claw-back suit against UBS, Deutsche Bank and CSFB. Citigroup has retaliated and launched proceedings
‘The market is not for the faint hearted; it’s for those prepared to compete.’ Andrew Welbourne, Lovells Milan 62 Legal Business December 2004/January 2005
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> against the Italian government
PARMALAT: THE BANKS
for approving the commissioner’s plan. Then there’s the investigation in Milan as to Italian law firms are not permitted to confirm their clients’ whether corporate bonds were identities. But here, Legal Business research has sourced the sold properly. And don’t forget national and international law firm involvement with the major the class action that has kicked financial players in Parmalat. off in New York. Firms such as Macchi de Bank Law firms Cellere Gangemi, Pedersoli e Citigroup Chiomenti Studio Legale Associati, Studio Legale CarClifford Chance bonetti, Puopolo Geffers Luise Merrill Lynch Allen & Overy & Associati and Vita Samory Bank of America Chiomenti Studio Legale Fabbrini e Associate are among UBS Linklaters the smaller, truly Italian firms Macchi di Cellere e Gangemi that are representing the banks Banca di Roma Studio Legale Carbonetti or creditors. But the larger Deutsche Bank White & Case Italian firms have not been left Morgan Stanley Chiomenti Studio Legale out. Bonelli Erede Pappalardo is Credit Agricole Studio Legale Ughi e Nunziante representing US financial instiBank of Boston Vita Samory Fabbrini e Assoc. tutions and investors that have CSFB Allen & Overy underwritten public bonds and Chiomenti Studio Legale private placements issued by The Royal Bank of Scotland Allen & Overy various Parmalat entities ING Studio Legale Bianchi worldwide. Chiomenti Studio BNP Paribas Clifford Chance Legale has picked up multiple Bank Intesa Pedersoli e Associati instructions: Giorgio Cappelli is Source: Legal Business representing Bank of America; Emanuele Gamna is joint Studio Legale Delfino & counsel (with Clifford Chance) for Citigroup; Associati Willkie Farr, meanwhile, Filippo Vassalli is instructed by Morgan has been negotiating for further Stanley; and Giulia Battaglia is acting for creditors the reimbursement by CSFB. The usual international suspects loom Parmalat of $320m in bonds to a large: Allen & Overy, Clifford Chance, Freshrange of US institutional fields Bruckhaus Deringer, Simmons & investors. ‘With all the major Simmons and White & Case have been financial institutions involved, a advising an array of the international investlist of the law firms instructed ment banks that propped up the empire.
includes just about everyone,’ says Simmons & Simmons’ banking partner, Alan Karter. But while the lawyers get stuck in, foreign business stays away. ‘Parmalat has seriously dented the credibility of the Italian financial system,’ says Maurizio Delfino Willkie Farr & Gallagher. ‘The international appetite for unrated Italian debt has dried up,’ adds Karter. ‘One bad egg has affected the rest of the nest, and that is a real shame, considering all the other fine businesses in Italy.’
Impact It’s no secret that foreign investment into Italy has declined – and not just as a result of banks becoming more wary of granting loans. As well as the blow of the Parmalat scandal, the economic downturn that slowed markets around the world has also had an impact on Italy. High-value M&A work has decreased: Bonelli Erede Pappalardo’s Andrea Carta Mantiglia conservatively estimates a 10% drop in such work across the entire Italian market. With less work around, competition necessarily hots up. Add to this the fact that international firms, in particular those from the US, are eager to make their mark in Italy, and you get less carrion, more vultures – aggression is this year’s buzzword. ‘There are too many firms in the market; there aren’t enough deals to satisfy profitability for all the players,’ says Carlo Pappalaterra from Giliberti e Associati. ‘In the short term that means aggressive attitudes towards pricing and marketing, and in the medium term it means only the firms providing the highest services
“Clients praise the firm for quality of service, professionalism and pro-activity.” The Legal 500, 2004 Business & Financial Transactions Rome Office 11, Via Lisbona – 00198 Rome, Italy Tel. +39 06 8841535 Fax +39 06 8842094 info@psglaw.com www.psglaw.com Other Offices Milan, Naples, Verona Contacts: Gianfranco Puopolo g.puopolo@psglaw.com Frank Geffers f.geffers@psglaw.com
64 Legal Business December 2004/January 2005
Insurance Banking Energy Steel and Commodities Litigation and Arbitration Information Technology and Communications
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‘High-profile Italians are an utter pain in the arse. To work effectively we all need to pull together. It takes just a couple of difficult partners to scatter a good practice to the winds.’ British partner in Milan boutiques should stick to what they know or lose their independence to global firms. Thirdly, on the international side, have the English firms learned from their failure to retain their Italian rainmakers and, finally, is the American model more suited to the local market? It can be said with certainty that the top three Italian firms – Bonelli Erede Pappalardo, Gianni, Origoni, Grippo & Partners, and Chiomenti Studio Legale – won’t be announcing surprise international mergers in the near future. ‘We are not part of a global model,’ comments banking partner Giorgio Cappelli from Chiomenti. ‘Our alliance with Skadden, Arps, Slate, Gattai: US firms are more partner-intensive
will survive. The market won’t be the same in five years’ time.’ ‘Clients are concerned about fees,’ agrees Marco Consonni from Galgano. ‘There’s strong competition in reducing prices.’ On the project finance market, Andrew Welbourne of Lovells in Milan adds: ‘Competition for work is sufficiently intense that aggressive pricing seems to be de rigeur for most of the national and international firms, as opposed to being a one-off tactic for new entrants looking to build a track record. The market is not for the faint hearted; it’s for those prepared to compete.’
The cream As elbows are sharpened and practitioners manoeuvre to find a position in the market, analysis of the different models and their relative success, or perceived failure, is rife. Four major themes dominate. First is the question of whether or not the Italian powerhouses can make the transition to the next generation and, secondly, if the smaller
Meagher & Flom simply means that on big deals that have an important AngloSaxon component, for example, on equity offerings or big M&A deals, we get to combine the assistance of two highly regarded firms.’ Still, though, Cappelli rules nothing out. Of full integration: ‘Never is a very strong word,’ he says with a polite smile. ‘At the moment, though, we are very happy with how the relationship stands.’ For now, the top three Italian firms have nothing to gain from their inclusion in a global firm. This lesson was learned most dramatically by Linklaters, when it became clear that Gianni, Origoni, Grippo & Partners was never going to agree to merging. ‘Italian firms like ours rarely accept to be branch offices,’ explains Francesco Gianni. ‘In jurisdictions like Italy it would prove more effective to choose the right people and let them run their own shop within the framework, let them retain their autonomy.’ The most recent financial information available takes us back to 2001. Those tables, recently published again in Plus Il Sole 24 Ore, show that Sergio Erede’s taxable income then was €11.46m. Franco Bonelli’s >
PEDERSOLI E ASSOCIATI STUDIO LEGALE Mergers & Acquisitions; Private Equity; Venture Capital; Corporate Law; Capital Markets; Securities Law; Banking; Acquisition Finance; Financial Services; Tax; Litigation; International and Domestic Arbitration; Insolvency and Restructuring; Antitrust; Project Finance; Real Estate; Commercial Law; Pharma & Biotech; Intellectual Property. Contacts: Via Monte di Pietà, 15 20121 Milan – Italy
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Giovanni Bandera (Tax) Tel no: +39 02 30305.1 Fax no: +39 02 30305.333
December 2004/January 2005 Legal Business 65
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> was €8.46m, while Francesco Gianni’s came in at €4.98m. Granted, they were happier economic climes. At the end of the day, though, welcome packages don’t run on indefinitely, and a lockstep has limits.
Tadeschini. At Bonelli Erede Pappalardo, the likes of Roberto Cera, Umberto Nicodano and
The next generation The cult of the individual, a very Italian phenomenon, ensures that the Italian legal scene is dominated by specific names, almost exclusively men, many of whom have founded their own firms. The future success of those firms hinges on the ability and ambition of the next generation of Italian lawyers. The quality is, for the most part, there. At Chiomenti, legendary names such as Michele Carpinelli, Roberto Ghio and Luigi Bendi are grooming future banking and finance and corporate stars such as Giorgio Cappelli and Francesco
Wrigley: Anglo-Italian mix pays off at Clifford Chance
Alberto Saravalle have proved themselves as next-generation superstars. The challenge is to ensure that the rising stars don’t get lured away by a share of the equity offered by international firms or, once the client relationships are established, go solo. Smaller but equally impressive boutique firms face similar dilemmas: how should they manage their relationships with foreign firms and ensure the future of their own? Merging is a viable option; an international brand is still attractive to many. Witness in the last year, for example, Alberto Morano’s move to join his firm Morano & Associati with White & Case (following the departure of Alessandro Varrenti, now at Varrenti, Bassan, Lenzi e Associati Studio Legale e Tributario), or Piergrossi Villa Bianchini Riccardi’s metamorphosis into Piergrossi Bianchini Eversheds.
WORLDWIDE OFFICE CONTACTS
Chiomenti Studio Legale is one of the oldest Italian law firms organised as a partnership. Chiomenti Studio Legale is currently composed of more than 180 lawyers and tax advisors, including 25 partners, and has offices in Rome, Milan, London, New York and Brussels. Throughout its history, Chiomenti Studio Legale has provided advice with respect to a significant portion of the major business transactions involving Italy in both the corporate and financial fields. Chiomenti Studio Legale has always been a leader in tailoring legal techniques specifically developed in an international context for implementation in Italy in order to accommodate the requirements of an international clientele. In 2001, Chiomenti Studio Legate and Skadden, Arps, Slate, Meagher & Flom entered into a strategic alliance that combines their respective strengths in US, Italian and English law. The combined broad experience of the two firms in mergers and acquisitions, capital markets, banking, project finance and other corporate areas translates into the highest quality of legal services.
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66 Legal Business December 2004/January 2005
ITALY Head Office Via XXIV Maggio, 43 – 00187 Rome Tel: +39 06 466221 Fax: +39 06 46622600 Email: roma@chiomenti.net Via Verdi, 2 - 20121 Milan Tel: +39 02 7215 71 Fax: +39 02 7215 7224 Email: milano@chiomenti.net UNITED KINGDOM 20 Berkeley Square, London W1J 6HF Tel: +44 20 7569 1500 Fax: +44 20 7569 1501/25 Email: london@chiomenti.net USA One Rockefeller Plaza, Suite 2404, New York, NY 10020 Tel: +1 212 660-6400 Fax: +1 212 660-6401 Email: newyork@chiomenti.net BELGIUM 41 Av. R. Vandendriessche,B-1150 Brussels Tel: +32 2 7759900 Fax: +32 2 7759927 Email: bruxelles@chiomenti.net
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www.chiomenti.net Languages: English, French, German, Italian
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Such moves remain relatively rare – put simply, most practitioners would rather be masters of their own destiny. Pedersoli e Associati, a corporate boutique established in the 1950s by Alessandro Pedersoli, is now considered – along with Grimaldi e Associati, NCTM, Pavia e Ansaldo and Giliberti – to be among the very best mid-sizers. Having parted ways with litigation specialist Giuseppe Lombardi in 2004 after three years together, all eyes are on the future. ‘You have to remember,’ says Giovanni Pedersoli, one of three junior Pedersolis who are equity partners, ‘firms in Italy have a long history. The idea of merging and losing our culture worries many of us. It isn’t a matter of money, but reputation – ensuring that the firm’s culture survives.’ ‘We have been approached by American
and British firms to merge,’ says Stefano Petrecca, a tax partner at highly reputed tax boutique Di Tanno e Associati. ‘But so far we have refused. Although we like to have relationships with international firms, we don’t want to lose our independence.’ The ubiquitous independent Studio Legale Sutti was established in 1953 – a full 40 years before Clifford Chance arrived.
The internationals: Brits Italian lawyers, in accordance with their professional codes, are self-employed. The stream of defections from British firms in recent years is testament to this streak of barrister-style
self-determination. The high-profile moves have been well documented. Vittorio Grimaldi’s split from Clifford Chance was the first major backlash to the merger frenzy that occurred in the late 1990s; Simmons & Simmons’ loss of its managing partner Bruno Gattai occurred in 2003; the founding partners of Freshfields in Milan – Paolo Colucci and Giovanni Lega – splintered and set up their own Studio Lega Colucci e Associati earlier this year. Finally, also in 2004, Gianni Origoni parted ways with the Linklaters alliance, and Roberto Casati turned his back on Allen & Overy. One top-billing partner from a British firm in Italy sums up a fickle market: ‘It’s all based on reputation. International firms offer the Italians packages with a comfortable guaranteed income for about three years. Once the honeymoon period is over, they’re expected
ITALY’S HIGHEST EARNERS Lawyer/Firm Sergio Erede Bonelli Erede €11.46m Franzo Grande Stevens Grande Stevens €9.38m Franco Bonelli Bonelli Erede €8.46m Francesco Gianni Gianni Origoni €4.98m Roberto Cera Bonelli Erede €4.86m Alessandro Pedersoli Pedersoli e Associati €4.01m Umberto Nicodano Bonelli Erede €3.82m Bernardino Libonati Libonati €3.47m Vittorio Grimaldi Grimaldi €3.08m Nicholas Wrigley Clifford Chance €2.99m Carlo D’Urso, D’Urso Munari €2.90m Marco Di Paco Camozzi Bonissoni €2.88m Enrico Giliberti Giliberti Pappalettera €1.98m Roberto Casati Cleary Gottlieb Steen & Hamilton† €1.90m Alberto Saravalle Bonelli Erede €1.90m
Taxable income*
*Data in millions of Euros, relating to 2001 Source: Plus Il Sole 24 Ore, November 2004 †Was at Allen & Overy in 2001
December 2004/January 2005 Legal Business 67
>
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> to pull their weight. The less
Italian lawyers who have already scrupulous take advantage of that developed a strong and move on. Or, if they aren’t client base don’t bringing in what was expected, seem to like the they’re asked to pack their bags. English model. ‘It High-profile Italians are an utter has been hard for pain in the arse. To work effecthe English firms to tively we all need to pull understand the together. It takes just a couple of Italian market difficult partners to scatter a mentality and way good practice to the winds.’ of working,’ says To many Italians, a more NCTM partner palatable explanation for the Filippo Cesaris. attrition is that the English part‘Italian lawyers are nership system – with its very independent,’ emphasis on management and Capelli: ‘we are not part of a global model’ says Petrecca from Di reliance on leverage – doesn’t suit Tanno. ‘They usually don’t have the Italian psyche. Due to differences in the concept that the firm is strategic planning, management conflict or different from the men.’ cultural differences – call it what you will –
‘The UK firms want to invest in Italy, setting up the same partnership model here they have in the UK or elsewhere, but, as has happened in the past, they look for the tycoons of the Italian legal market,’ says Livio Esposizione, partner at Studio Legale Tonucci. ‘However, the Italian key players they’ve selected have spent their lives developing relationships with their clients and, therefore, the full integration the UK firms have in mind is never going to work, since the lawyers don't want to waive the power and the money they have acquired.’ ‘The English firms in Italy that have had a difficult time will bounce back,’ says Delfino. ‘They have good lawyers, and over time they will hire new ones to replace those that they have lost. In any event, the pull of the London financial market is such that they will always be busy in Milan or Rome.’
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Indeed, the figures show the resilience of the English model. At Simmons, comparing the months May to September 2003 with the same period in 2004, there has been a 37% increase in billable hours recorded. Clifford Chance is also doing well: Italian turnover is expected to be in the region of €40m, with about €16-17m of that as profit. Just as LB was going to press, it was announced that former Fiat SpA general counsel Luciano Soldi had signed a professional collaboration agreement with the firm. Nicholas Wrigley, CC’s Italy managing partner, thinks he has found the right recipe. ‘We have combined the organisational and team skills offered by the Anglo-Saxon firms with a well-tested Italian platform, and Italian and Anglo-Saxon partners, all of whom are home-grown,’ he explains. Attracting fresh talent is easy. ‘We have not advertised any vacancies but I have been inundated with unsolicited CVs from young lawyers,’ says Richard Slater, Simmons’ managing partner in Italy. The likes of Ashurst, Bird & Bird or DLA show that smaller entities can operate with maximum autonomy, run more like boutiques by Italian lawyers. ‘We have the benefit of a great brand,’ says Massimiliano Mostardini, managing partner of Bird & Bird in Italy. ‘We use the Bird & Bird knowhow, technology and network, but the clients know us personally. Some firms want to impose their own models on Italians, but Italians will kick back at that.
‘One bad egg has affected the rest of the nest, and that is a real shame, considering all the other fine businesses in Italy.’ Alan Karter, Simmons & Simmons
You can’t put us in an organisation and put chains around us – it won’t work. You have to leave us to be creative.’
The internationals: US US firms are adding tentative pieces to their European jigsaws in Italy. Not long ago, McDermott Will & Emery merged with Carnelutti; Shearman & Sterling’s recently opened office in Rome deals only with US law at the moment, but
the firm is said to be looking to expand with local hires. Latham & Watkins and Jones Day are also believed to be investing further in their Italian offices. Of particular note is Dewey Ballantine, which opened last year with Bruno Gattai at the helm. ‘US firms are more partner-intensive,’ he says. ‘Partners spend 80% to 100% of their time working with their clients. In the UK firms, partners spend more time dealing with business development and management issues. In Italy we are more similar to the American model.’ It’s believed that Weil, Gotshal & Manges, Kirkland & Ellis and Gibson, Dunn & Crutcher are also looking for ways to enter the market. After A&O, Cleary Gottlieb was corporate rainmaker Roberto Casati’s firm of choice. There he claims to spend more time on client work and less on internal management issues, and makes a point of stressing that he’s ‘impressed by the climate of collegiality and the strength of the firm’s partnership values’. The balance between independence and partnership is the key to long-term success in Italy. As Maurizio Delfino puts it: ‘There must be a common ground of values and goals which is shared, but also adequate autonomy in the pursuit of the common goals, so that Italian habits and preferences also play an important role.’ Which firms get that balance right will determine who will join the successful independent firms controlling the legal market in the future. LB camilla.sutton@legalease.co.uk
DE BERTI JACCHIA FRANCHINI FORLANI Via San Paolo, 7 - 20121 Milan Tel: +39 02 72 554.1 Fax: +39 02 72 554.600 E-mail: milan@dejalex.com Website: www.dejalex.com
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Number of lawyers: 55 At this office: 38 Contact: Gianni Forlani (g.forlani@dejalex.com)
December 2004/January 2005 Legal Business 69