Legal Tech Consolidation – The Market Verdict
By Irene Madongo, News Reporter
There’s been a surge in legal tech consolidation recently, with Thomson Reuters’ (TR) announcement of its acquisition of legal data sharing platform HighQ a case in point.
News of the acquisition has thrust the ‘c’ word back on the table for discussion: consolidation, a scenario where a few giants could mop up the throngs of start-ups, and in the case of HighQ, more established medium-size legal tech companies, that are dotted about the industry.
Artificial Lawyer asked some legal tech experts for their verdict on what is happening.
First, regarding how TR sees things, they said the acquisition would give it a ‘best-in-class’ platform at the heart of the legal software ecosystem, and position it to sell HighQ to hundreds of law firms and corporate legal departments around the world.
For its part, HighQ expressed ‘excitement’ at expanding its global footprint and leveraging the TR network to cover several industries.
But, what did a sample of market experts think?
The Consolidation Crunch
‘On the part of TR it’s a smart, strategic move. The deal will add considerable value to its offering. It’s also clearly a sign of increased consolidation in the industry,’ said Juro CEO, Richard Mabey.
‘But, in terms of product management, trying to be all things to all people is dangerous. What we often see in the mid-market is legal teams patching together best-in-class solutions and then connecting them via APIs. So, it will be interesting to see if a one-size-fits-all approach can work,’ Mabey explained.
Stuart Whittle, a partner at Weightmans and its Business Services and Innovation Director, said: ‘There are too many products out there for a relatively small market all playing in a similar sort of space. The legal tech market feels like the dotcom bubble, there’s lots of activity, and lots of money going about.’
He suggested that we are probably looking at a future where there will be less choice for law firms in terms of the total number of main vendors.
‘That’s the way of the world. If you look at how the ERP (Enterprise Resource Planning) market has evolved for example, there’s only a few players right now. Fragmented markets tend to consolidate. Look at the law firm Practice Management System market. There aren’t many choices these days,’ he added.
Talk of consolidation also poses the question of whether it would be beneficial to the market, especially when considering the other key deals that have been sealed recently, including Litera Microsystems’ acquisition of Workshare, which was signed off earlier in July.
That deal will create ‘immediate benefits from a simplified vendor relationship’ as well as simplified software updates, according to Litera, with Workshare chief Michael Garrett adding that the acquisition is a ‘great opportunity to build on the strengths of each organisation to better serve the market’.
That said, experts see there are pros and cons to consolidation.
‘With consolidation there’ll be less competition, which means things tend to get more expensive. Less competition potentially drives less innovation. What I’d like to see is technology that enhances lawyers’ work flows, and works with them rather than against them, as it sometimes feels,’ Whittle added.
‘If the HighQ purchase is part of TR’s platform strategy of creating truly interoperable, frictionless solutions then that may be the price you have to pay as there won’t be many suppliers that have the size and the capability to do that. What I would not want to see is a de facto monopoly which already exists in some categories of vendor,’ he concluded.
And, Juro’s Mabey added: ‘Where the giants may struggle is with keeping up with the pace of innovation in the industry. And acquisition is one way they can achieve this. In this deal, TR is buying a skilled team and a highly focused and well-executed product. So it’s generally an exciting development for them.’
“Less competition potentially drives less innovation.”
Some industry experts also see consolidation as simply a market reality that we have to accept, because the current horde of point solutions is just too unwieldy.
Linklaters’ Head of Innovation, Shilpa Bhandarkar, said: ‘Consolidation is a good thing. It is not feasible to have a different legal tech product for each individual legal task, for each transaction type, for each jurisdiction.’
I would want to give our lawyers a seamless experience when using technology so that they can focus on our clients and on the legal advice we are providing, rather than the individual tools required to deliver that service.’
‘I would therefore much prefer a smaller pool of robust legal tech vendors, with more interoperability and integrations between their individual products, to having infinite choice,’ she concluded.
With the rise in consolidation, could law firms then opt to use only bigger corporations offering a broad range of services on a single platform, or will they continue to use a wide variety of legal tech vendors as and when needed?
‘For the present, law firms will try and do both, because they aren’t confident enough that all the solutions have been found yet. We’re some way from a settled market. People will stay curious about what everybody else is developing,’ said CMS’s Charles Kerrigan, a partner in the Banking & International Finance Team.
Bhandarkar added it all came down to making life easier for the firm: ‘If our technology needs can be sourced from a single supplier or a small number of suppliers, that makes onboarding and integration into the firm’s technology stack and workflow that much easier. But the very nature of innovation means that the landscape is constantly moving, and we are therefore likely to continue to use a wide range of vendors to fulfil the needs of different clients, practice groups and transaction types.
‘Ultimately, our aim is to use the right product to solve the particular problem (assuming it needs a tech solution) and I’m agnostic to whether that is a bigger vendor or a legal tech scale-up,‘ she added.
Still A Young Market
Kerrigan at CMS also noted that the fact TR didn’t reveal the price of its purchase of HighQ tells us something about the stage we are at in terms of market evolution: this consolidation phase is only just beginning.
‘This is a young market and we don’t have many [pricing] benchmarks. But each deal is probably very different. Also, in legal tech M&A, like M&A in other tech sectors, firms will make acquisitions for things other than revenue, for example access to developer talent and to markets,’ Kerrigan explained.
This is just a snapshot of views, but one clear theme emerges, while some may welcome consolidation, and others are more sceptical, the bottom line is whether or not it really helps the law firms and their clients. And that will be the ultimate test of all these deals.
[ Note: Readers may have noticed that this article has been written by Irene Madongo, who now will be working with Artificial Lawyer on news and features. You’re quite likely to get a call or email from her in the weeks ahead. Please feel free to drop her a line if you’re a law firm and would like to have a chat about legal tech and innovation, you can email at: firstname.lastname@example.org ]
Interesting takes on this. With regard to buying and bolting-together products, that seems to be the Intapp strategy and it has managed to make it work. Personally, I see the TR HighQ acquisition as a good fit. HighQ is very flexible and broad and will provide a capable platform for TR to bolt onto and integrate some of its various offerings as well as fill some functional gaps.
Great article with some good insight. I would love to hear more from the end users of the platform and those most affected by such tech, rather than from the procurement angle. It’s them that ultimately drive change long term.
I second this