EY in talks to acquire Thomson Reuters Legal Managed Services: What we know

Insiders are officially staying tight-lipped over whether EY is in talks to acquire Thomson Reuters legal managed services division, but we understand from a credible source that is indeed the case, as Thomson Reuters’ regroups and focuses its efforts on its content and technology offerings.

Thomson Reuters has been engaged in over a year of wholesale restructuring, starting with the sale in 2018 of its financial and risk business to funds managed by Blackstone, for which it received around $17bn in gross proceeds.

The sale meant it had cash in the bank for the restructuring drive, which started at senior executive level in around June 2018: Brian Peccarelli was appointed as co-chief operating officer alongside Neil Masterson. Four senior executives left the business including highly respected president of legal, Susan Taylor Martin.

The business was restructured around three customer segments:

– Legal professionals, including law firms; government; academics and the Bar, led directly by Peccarelli;

– Corporates, including all the work that Thomson Reuters does with corporations, whether the GC or CFO, led by Piotr Marczewski; and

– Tax Professionals, including all the work Thomson Reuters does with accountants, led by Charlotte Rushton.

Within the legal professionals segment, there are now five distinct businesses: the circa $600m small law segment (headed by Mark Haddad); mid-size law firms (headed by Barb McGivern); global large law and Canada (led by Neil Sternthal); US government (headed by Steve Rubley); and Europe, which includes the UK and Ireland, plus Thomson Reuters’ Spanish business (led by Lucinda Case).

Each of those groups has its own head of product, technology and marketing and, aside from in the small law segment, will now sell the entire stable of client products including Practical Law, Westlaw, Contract Express and the Elite technology stack including 3E and eBillingHub in a significant departure from the previous business model and strategy, which was focussed on product lines.

The big focus now, as evidenced by Thomson Reuters release of major new workflow and pricing solution Panoramic, is on becoming more of a technology business and knitting these offerings together – something that is welcomed by customers, who can now focus holistically on their end goals.

Thomson Reuters, which is listed on the New York and Toronto stock exchanges, is understood to have a substantial sum of money put aside for further investment in technology, where the margins are significantly higher than in services.

The LMS grew with the acquisition of major legal process outsourcing business Pangea3 in 2010, which at the time of its acquisition had 650 employees across Mumbai and New Delhi.

At the time, then Thomson Reuters CEO Peter Warwick said LPO added a vital strategic complement to the Thomson Reuters portfolio. However, the restructured organisation is now focusing heavily on ways to boost its revenue, which has typically seen around 2-3% growth per annum.

Contrast this with EY’s bid to build up its global legal managed services offering, starting with the acquisition of Riverview Law in August 2018, and one could see why Thomson Reuters own LMS – self-described as re-envisioning the future of legal outsourcing services – would be a more natural fit.

As yet, no detail has been confirmed by Thomson Reuters or EY and both declined to comment, with a spokesperson for Thomson Reuters saying: “As company policy, we don’t comment on market speculation or rumors.

A spokesperson for EY said: “As a matter of policy, we don’t comment on rumors or speculation.”