Legaltech in May
We bring you all the top news and analysis from the past month with extra commentary from leading players. This article was first published in the May Orange Rag – to be first to hear all the news and analysis sign up for our free newsletter here: https://legaltechnology.com//latest-newsletter/
If one trend jumped out in May it was the ever-increasing dominance of private equity in shaping and driving the products on offer in the legal technology sector, as we see much needed consolidation (and in some cases collaboration) between vendors.
On 7 May we revealed that Hg has acquired Litera Microsystems from K1 Investment Management after a three-year period in which Litera is said to have tripled its revenue.
K1 notably built the company through merger in a bid to create an end-to-end document solution for lawyers: in 2016 K1 acquired Microsystems and Xref followed in 2017 by the acquisition and merger of Litera and the Sackett Group. It invested a total of $100m on the four acquisitions in a deal finalised on 11 August 2017. According to market sources the number K1 is said to have sold for is a fairly eye watering $400m. No wonder Litera was frustrated at the reference to the $32.1m paid by HgCapital Trust, which was simply one small part of the transaction.
Speaking to Legal IT Insider, Litera’s CEO Avaneesh Marwaha said: “We achieved our targets quickly and it shows that the market is keen to move to a consolidated vendor – the market has received it really well.
“For our customers, they aren’t going to see any change as a result of the acquisition by Hg: we are the same company with the same brand and the same values. But, as with any new business, Hg will want to accelerate growth and we will take the vision further and faster, which is exciting.”
He added: “When I go out and meet global CIOs it’s clear that they are excited and asking us to do more: go wider in our product set and deeper in our functionality and we’ll do that either organically where possible but we’ll also look out for acquisitions.”
The Litera deal is the clearest example yet of how the private equity is leveraging its deep pockets and business acumen to shape play in the legal sector – whether that be owning the desktop or in providing genuine client lifecycle management. As clients increasingly demand a joined-up offering – or even before they do – private equity is obliging. Buckle up for more deals.
Hg, which has focused on the legal sector for 15 years, now has six legal and compliance investments in its current portfolio, including global enterprise legal management provider Mitratech and German legaltech company STP, which provides insolvency and legal practice software.
How far they will go in rolling up vendors we can only speculate: will Mitratech Litera be next?
The success of the combined model, thanks to its ability to cross-sell and provide the client with one environment, is evident: recent wins for Litera include Magic Circle firm Clifford Chance, which in 2018 selected the entire Litera Desktop. That came after Allen & Overy, which has 2,800 lawyers in 40 offices, in October 2018 selected Change-Pro Premier and Metadact for its firm-wide document and comparison and metadata management.
Litera, which already offers Kira through its toolbar, is vying to be the platform with which other vendors must integrate.
Speaking at our #GlenLegal19 CIO conference in Gleneagles Hotel in March, Hector Guinness, a principal at Hg, told a packed room that the opportunity to improve productivity in law firms is “almost limitless” commenting: “There is this huge wave of legal technology to drive that productivity. And it is great to see law firms increasingly embracing that. As investors, that makes legal tech a great place to be.”
Litera wasn’t the only private equity-driven consolidation in May, as Onit, which received $200m from K1 Investment Management in May (you start to see the ebbs and flows of private equity money after a while) acquired SaaS legal spend and matter management platform SimpleLegal.
Onit provides everything from enterprise legal management to contract management and business process automation. The ambition is to provide legal operation teams with a comprehensive end-to-end solution.
With the investment from K1, Onit has been looking at different ways to scale up, after the company more than tripled its customer base and revenue in two years – sound familiar?
While there appears to be overlap between Onit and SimpleLegal, according to a statement from Onit all product, support and services will continue uninterrupted for all customers.
One of those customers is Baker McKenzie where David Cambria, former global director of operations at Archer Daniels Midland, helped to shape the product and has now become one of the rarer private practice clients.
Neil Malik, managing partner at K1, said at the time of K1’s investment: “Onit’s platform has raised the bar on what users expect from software that extends across the enterprise. We’ve seen the company more than triple its customer base and revenue in two years and we have tremendous confidence in the management team’s long-term vision.”
Los Angeles-based K1 has partnered with over 100 enterprise software companies including Apttus, Buildium, Certify, Checkmarx, ChiroTouch, Chrome River, Clarizen, Granicus, IRONSCALES, Jobvite, Onit, Rave, RFPIO, Smarsh and WorkForce Software.
It’s not so much consolidation but collaboration that you need to look out for within the AI-backed contract review sector, which has, for clients, a fairly overwhelming number of players.
While Neota can automate a client’s own contract approval process, that falls down if a third party submits their own terms.
Speaking to Legal IT Insider, Neota’s director of business development, Mark Surico said: “We often get clients asking what happens in that situation and the answer was that our systems cover the drafting of your documents but not third party paper. What the client decided to do in this situation was to find a company that does do that, and that is LawGeex.”
Through the integration with LawGeex, clients can now automatically send their NDA to be reviewed against stipulated terms or standards, with the red-lined agreement returned for review, approval and execution.
Surico says: “Now when a third party says ‘I want to upload my own NDA’ instead of going to a legal reviewer for manual review, it goes directly to LawGeex and they provide automatic feedback, providing a whole solution for the NDA review process.”
This is likely to be a big time saver so it’s no surprise that Surico says: “The feedback has been great” or that LawGeex and Neota are looking at further ways to collaborate.
The second third party paper collaboration in May saw UnitedLex tie up with Seal Software. UnitedLex’s end-to-end contracts lifecycle services platform will route third-party contracts to Seal for comparison and redlining.
Deviations from a client’s standard contracting terms will be flagged and a process put in place for further action.
UnitedLex is forecasting that its clients will achieve more than $250 million in accelerated revenue in 2019 due to faster contracting cycle times. Note that towards the end of last year major private equity house CVC acquired a majority stake in UnitedLex.
We spoke to Seal’s founder and CEO Ulf Zetterberg about the saturation in the contract review market and asked if it’s ripe for consolidation. He told us: “I see some of the new law companies playing the whole marketing game – they are growing but not investing in how they deliver law service. Unitedlex is well funded and [CEO] Dan Reed has no problem in sticking out his neck and driving change. We are happy to partner with them and we share the view that real transformation will require investment to get there. This is a case of all in or not.”
He added: “Many of the private equity firms have seen the transformation in industries like healthcare and manufacturing and they know what will happen: they are prepared to play the long game. But for the long game you need to put in time and energy.”
So what do users look for in order to know that they are working with companies here for the long term? “More and more customers are mature, experienced buyers and they want you to show proof of concept and strong references for what you have done for other clients: the proof is in the pudding not just the talk and you have to really show what you have done. We have moved past the hype cycle,” Zetterberg says.
Will we see further collaboration or consolidation? “We see more collaboration driven by the customer,” he says. “Transformation is about change management more than anything – technology is just one component. Transformation means you change how you solve the problem.”
Certainly, clients would welcome more clarity. Stéphanie Hamon, formerly managing director, head of external engagement at Barclays, told us: “Anything that would make reading the market and understanding the offering easier would be welcomed by the client. It’s quite challenging at the moment to know all the proposals out there and to assess their respective merits.”
Big Four alliances
EY and Thomson Reuters
Law firms pay attention: collaboration is also the dominant theme when it comes to the Big Four accounting giants’ activity over the past month.
Not picked up by the legal press because it looks like a tax alliance – but we argue this may well be just a sign of what’s to come – Thomson Reuters and EY in May expanded on the relationship that recently saw EY acquire legal process outsourcing business Pangea3.
The alliance brings together Thomson Reuters ONESOURCE global tax technology with EY Tax Technology and Transformation (TTT) services to help multinational organisations implement seamless tax compliance operations.
The devil is in what Thomson Reuters say about it. Brian Peccarelli, chief operating officer, customer markets, Thomson Reuters, says: “Businesses are responding to technological, social and professional disruption by transforming how they operate and are structured. They now want those they work with to provide transparent, integrated and agile technology with the services that are tailored to meet their needs, not just a one-kind-fits-all offering. This alliance with EY enables us to provide our clients with the very best technology and advisory services for tax, accounting and legal departments.”
Peccarelli used to head tax but in addition to the COO role is now head of legal professionals, including law firms, government, academics and the Bar.
Deloitte and Relativity
Also entering a strategic alliance in May were Deloitte and Relativity, which together are offering Relativity Trace, a compliance monitoring application.
Housed on Relativity’s cloud-based platform RelativityOne (or elsewhere), Relativity Trace captures structured and unstructured data from more than 40 sources, including email, audio, chat and other file types.
The solution offers near-real-time alerts on high-risk activities like fraud or collusion that necessitate closer analysis.
It follows last year’s announcement that Deloitte and Relativity were turning their nine-year relationship into an eDiscovery alliance.
Jordan Domash, general manager of Relativity Trace for Relativity, said: “Increasingly our clients are asking for ways to identify high-risk behaviour occurring in their businesses. To us, a proactive automated approach with integrated machine learning is key to culling massive amounts of data and reducing false-positives. That said, for such automation to work well, it needs to be customised and monitored by seasoned investigative professionals.”
The shift to the cloud in the document management system sector is really taking off and driving huge volumes of work for the two key players, iManage and NetDocuments.
In May we revealed that Am Law top 50 law firm Wilson Sonsini Goodrich & Rosati had swapped out its iManage document management system for NetDocuments, led by chief information officer Michael Lucas, who led the same move while at Akin Gump.
The NetDocuments selection is said to be a key step in Wilson Sonsini’s ongoing strategy to move its entire technology stack to a cloud-based model.
The move was very much driven by Lucas, who told Legal IT Insider: “I’ve worked at Hogan Lovells, which is moving to NetDocuments, and at Akin Gump, where I signed the deal with NetDocuments. I had a lot of familiarity with both products and a lot of respect for both management teams but where we landed was that we thought the SaaS platform of NetDocuments was very strong and they’ve been doing it for a long time. It was a platform play and a cloud play and at Wilson we continue to implement cloud solutions. We’re doing Office 365 now and my goal is to be pretty much pure cloud by 2020.”
One of the key things that swung the dial to NetDocuments was its client file management solution. Lucas said: “Like most firms we have a data sprawl and files in different places. We wanted to have a system that can govern files wherever they are and synchronise with products like Box or corporate Dropbox.”
Lucas and the team were also generally attracted by NetDocuments’ platform play and he added: “There will be a lot of partners who will join the NetDocuments platform – people once worried how their systems were going to integrate with the document management system but they will all end up there in the cloud.”
NetDocuments also won Dickinson Wright – an OpenText AmLaw 200 site – which also selected ndMail for predictive email filing and ndThread for chat-based collaboration.
NetDocuments at the end of April experienced a four-hour major outage – the company recorded it on its support site here: https://trust-us.netdocuments.com/
According to the support site, users were able to access the system, but logins were slow from 10am EDT and performance improvements were first logged at 15.39.
One CIO at a leading global firm with knowledge of the outage said: “If that was our document management system and we had a four hour outage it would be a killer for me and the team.”
We’ve scoured social media and can’t find a single user complaint. If we’re wrong let us know.
Baker McKenzie has selected iManage Cloud to replace its on-premises OpenText document management system in a major win for the Chicago-headquartered vendor.
Unusually, the firm said it was unable to speak to us about the selection.
This is the second major win for iManage in three months. In March Clifford Chance selected the iManage Cloud, moving off its SharePoint-based document management system, with security and user interface scoring particularly highly.
CIO Paul Greenwood told Legal IT Insider that iManage came out top for security and user experience.
It is all about the CRM this month as Intapp acquires Salesforce-based contract lifecycle management provider OnePlace, and the market is abuzz with what that means. We have some of the answers: see our interview with Intapp CEO John Hall on page XX.
The acquisition came inconveniently moments after we published a report into the CRM market, looking at the key players, trends and developments. If you haven’t downloaded that yet you ought to – we just need your contact details.
And as we exclusively revealed towards the beginning of May, Carey Olsen says that it is “on the start of the Peppermint journey”, including looking at Peppermint’s practice management system and other offerings after a successful business development CRM solution implementation across its nine offices.
The leading offshore firm went live on the CRM solution in June 2018 and, in just the first four months, 6,000 new contacts were added; open rates were up by 55%; click rates up by 26%; while undeliverables went down by 14% and unsubscribes by 70%.
James Prouten, group head of technology at Carey Olsen, said: “We are on the start of the Peppermint journey and are actively looking at Peppermint’s online portal, practice management system and other offerings.”
Vendors: The growers
Morae Global acquires Phoenix Business Solutions
It was good news in May for Phoenix Business Solutions, which has been acquired by Morae Global Corporation to form the third limb of the company after eDiscovery and strategic consulting/legal services.
The brand-new document and information management arm, which is headed by Phoenix co-founder Matt Crocker, has clear synergies with the other two divisions. The Phoenix name is retained for this service line.
Fellow co-founder David Boswell has moved into a senior managing director role, and shareholders and directors Lee Tomlinson and Ray Burch will take on the roles of EMEA new business sales director and director of pre-sales engineering respectively.
Speaking to Legal IT Insider about the acquisition, Morae’s co-founder Shahzad Bashir said: “This is a continuation of what we started three and a half years ago and that was ‘let’s stop the talk and do something that really makes a difference to how corporate law departments work and how they work with law firms and vice versa’.
“We said ‘we know we never want to be a law firm and the practice of law is off limits but let’s look at the business of law in the broadest and deepest sense: how to make life easy and efficient for law firms and law departments.’ Phoenix are culturally aligned with us on a mission to put information management right at the centre.”
Phoenix has seen its turnover grow anything between 20% and 30% in recent years, although the bottom line was hit in 2018 by buying out Pickett.
The company has grown to over 120 without contractors and while its biggest office is in London, it has offices in Frankfurt, people spread across Texas, Chicago and New Jersey in the US; an office of around 20 people in Australia; people in the Middle East; and then a newer office in Holland.
Hot on the heels of the appointment of Andrew Payne as head of professional services, Ascertus Limited in mid-May announced three further appointments across the organisation as the fast-growing iManage implementation partner tries to keep up with demand in the document management space.
Brendan McMahon and Nickie Ashton have joined as technical consultants and Melissa Jobson as marketing and communications manager.
McMahon and Ashton will closely work with the project management team. McMahon has worked at law firms, including Gowling WLG and Wragge & Co LLP, while Ashton joins Ascertus from BigHand. Prior to that, she was a Technical Deployment Consultant at The ai Corporation. Jobson was previously senior communications manager at HSBC.
Speaking to Legal IT Insider, CEO Roy Russell said: “The good news is that iManage are giving us plenty of new products to upsell to existing clients. The version 10 upgrade and upgrades to the iManage Cloud are keeping us very busy. There is also demand from clients who are unhappy with their existing partner and looking for a change and we provide a viable alternative.”
Ascertus is now up to 36 permanent members of staff, not including contractors. Two years ago it had around 13 to 14.
Russell says: “We’ve been profitable every year, we’ve no debt, no loans and we’ve grown organically.”
In the year to March 31 2018 Ascertus grew by 100%.
Other developments in brief
Six early stage companies, ranging from concept through to early revenue-stage, have joined the 10-week MDR LAB programme to work alongside Mishcon de Reya lawyers and other business experts from inside and outside the firm. They are Astroscreen; Index; Donna; Solomonic; Hipla; and Courtsdesk.
SA Court Goes Digital
South Africa is implementing paperless digital courtrooms across the country after selecting London-headquartered digital evidence management provider CaseLines, in a move that is hoped will considerably improve access to justice, including reducing “mislaid” evidence.
Chosen by the South African Office of the Chief Justice (OCJ), CaseLines is initially to be used in all civil litigation cases across South Africa, eliminating the need for paper in court by introducing an entirely digital platform.
Legal and accountancy publishing and software provider Wolters Kluwer in May faced a huge social media backlash over its perceived failure to communicate with customers after suffering a malware incident that took its platform offline for days.
Platforms and applications became unavailable on Monday 6 May, with Wolters Kluwer initially saying it was experiencing network and service interruptions.
Litera Microsystems has been chosen as one of Singapore’s Tech-celerate for Law pre-approved vendors, with others including Contract Express and NetDocuments. Under the new $3.68m programme, Singapore law firms can receive funding support of up to 70% of the first-year cost of adopting legal technology solutions.
The companies, other than those named above, are: Hotdocs-Lawcloud and Contract Express for their document assembly software, Relativity, CaseRoom and LegalComet eDiscovery Cloud for ediscovery software and TessaSays for automated client engagement.
Those selected for baseline solutions include CoreMatter, Clio and Tessaract.io for their practice management systems and Dropbox Business, TessaCloud and NetDocuments for document management and INTELLLEX, Westlaw Asia and Lexis Advance for online legal research.
Law firm venture
US employment law specialist Littler Mendelson has launched a new platform to streamline counsel and provide clients with data-driven insights.
“Littler onDemand was developed as a direct response to market demand. Corporate legal departments often don’t have the bandwidth to address the many workplace issues that arise during the course of business and taking all questions to outside counsel can be cost prohibitive,” Scott Forman, founder of Littler onDemand, told Legal IT Insider. “Littler onDemand fills that gap and allows us to leverage our scale to act as an extension of our clients’ legal teams, providing them with cost savings and an opportunity to direct in-house resources toward higher level services.”
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