Artificial Lawyer just shared the news (10PM GMT, Thursday, 27 Feb) that DocuSign has today announced its intent to acquire Seal Software for $188 million in cash in a move that will absorb the founding father of ‘legal AI’, which started back in 2010.
What does this all mean?
First, was this expected? DocuSign was already an investor. In March 2019 it made a $15m investment. And the year before Seal had formed a partnership with the electronic signature company. (Toba Capital also led an investment round into Seal in 2018 for $30m).
In May 2019, the CFO of DocuSign, Mike Sheridan, also joined the Board of Seal. And also, Ulf Zetterberg, the co-founder of the AI company, had stepped back from day to day leadership to focus on building up partner relationships with other companies, such as DocuSign.
All in all it was a clear indication that DocuSign was very close to Seal and that at least one of its founders was moving a little away from the helm. In short, the perfect time to make a nice big cash offer to the founders.
Is this a good price?
One legal AI source immediately noted to AL that the price looked relatively low considering Seal is 10 years old and had one of the best reputations in the market for the quality of its NLP software. It also works with some huge corporates.
Seal has not in the past revealed its revenue, but one could have perhaps guessed a buy-out price would have been a bit higher. One factor could have been the cash offer – allowing the founders and other shareholders to pocket a very nice windfall immediately.
Is this just consolidation at work?
In part, yes. Although this is DocuSign buying up a legal tech company, not two legal techs coming together. That said, DocuSign is used by many law firms and inhouse legal teams and it makes total sense to have an NLP capability if you are working with documents as your key business.
For DocuSign, which has revenues of $701m, this is a big deal. I.e. they paid out what is around one quarter of their own annual income for another company, simply to extend their offering.
This commitment says a lot about DocuSign, which sees itself at the centre of the document-focused economy. It’s also interesting to note that the company has an investment in smart contract pioneer, Clause – following a $5.5m funding that included other investors.
Is Clause next…? Maybe not just yet, but it’s clear to see what DocuSign is doing. And it makes sense.
Is this the end of Seal as an independent brand?
AL hopes not. DocuSign says it will integrate Seal’s technology more comprehensively ‘across the Agreement Cloud’ system it operates.
While, Scott Olrich, DocuSign’s chief operating officer, said: ‘We believe that AI will play a vital role in this transformation. And by integrating Seal into DocuSign, we can benefit from its deep technology expertise and its broad experience applying AI to agreements.’
Also, the company added that: ‘Once the acquisition has closed, DocuSign will continue to sell Seal’s analytics application. It will also integrate and leverage Seal’s AI technology to augment DocuSign CLM, one of the market’s leading contract lifecycle management solutions.’
So, that’s not exactly a clear commitment to keep the Seal brand going long term, but we’ll see.
These days such deals should not surprise us too much. Although, they always seem to send a jolt through the market, perhaps because when it comes to really well-known companies in what is a relatively narrow market still for legal AI tools, this remains a major change.
Seal was always a bit different to the other legal AI players, first because it was so much earlier into the game, and secondly in that they never really worked with law firms. And they’ll always have a special place in the history of legal AI’s development into a major industry.
Their future is clearly going to be all about integration with the far larger DocuSign now, and no doubt the deal will trigger other changes not yet announced as well. A new chapter for Seal is just beginning.
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