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Lawyers Must Prepare For Contract Tech Co. Consolidation

December 16, 2021

This article by Naseeha Machingal, Lead – Client Success & Partnerships, LegalEase Solutions, was published on on December 16, 2021 in Law360.com

Business in the legal technology segment known as contract lifecycle management, or CLM, heated up this year as prolonged office closures exposed the inefficiencies and bottlenecks in the contracting process.

Also known as contract tech, firms found CLM particularly useful for routine but essential tasks such as locating force majeure clauses, identifying inconsistencies and streamlining contract workflows.

As contract tech has evolved, lawyers have gained the ability to leverage artificial intelligence to abstract contract language, build clause libraries and schedule reports and alerts for renewals and conduct redline analysis to reveal hidden risk, and with proper use, streamline workflow.

With this evolution has come increased interest from investors, and in recent months, the sector has a seen a flurry of venture tech funding announcements by CLM providers. These Included funding announcements from:

  • InCloud Counsel, now rebranded as Ontra, for $200 million in series B funding to expand its CLM automation tools; [1]
  • ContractpodAi, for $115 million in funding with its plan to build a OneLegal platform; [2]
  • IronClad, for $100 million in series D funding; [3]
  • Evisort, for $35 million in series B funding; [4] and
  • LinkSquares, for $40 million in series B funding. [5]

The CLM sector is awash in cash right now and the number of providers is increasing every day. According to data from legalcomplex.com, there are now 200 CLM companies in the

U.S. — excluding e-signature companies — and strong growth is continuing.

But will this growth last, particularly with overall consolidation in the legal tech space? And more importantly, what do attorneys from law firms and in-house legal departments need to do to ensure they have access to CLM technology they have come to rely on?

Legal Tech Company Consolidation

As any industry matures, you will usually see consolidation in the space as stronger companies secure more market share and either drive out or acquire those not performing as well. Legal tech is no different.

Reasons for consolidation include the expansion of the customer base as companies leverage mergers and acquisitions to acquire their rivals’ customer base, and to consolidate their existing market position.

They also include the need for product completeness, with CLM as a use case for consolidating companies so they can provide a product that takes care of all contract pain points. A certain company that has a great solution for contract drafting may look at acquiring a technology company that has a negotiation platform to complete product offerings or to find that missing piece in the legal innovation jigsaw puzzle.

Geographic expansion allows the accessing new markets by acquiring a leading player in another geographical location is an old trick in the book for consolidation. Meanwhile, the leveraging of advanced technology and artificial intelligence is important as dominant players and market leaders are acquiring niche companies who offer robust and cutting edge technology for a specific use case.

The desire for a single operations platform, increasing their value proposition and market share by consolidating several distinct legal operations functionalities and features onto a single platform is a another reason why companies look at acquisition.

Also crucial is the need for accelerated revenue growth and access to investment money. Legal tech companies have already seen more than $1 billion in venture capital investments so far in 2021, according to Crunchbase data. With increased investments comes the need for research and development to build expansive product lines, grow customers and revenue, and provide investors with the return on investment they demand.

At the moment, some CLM companies solve a specific problem in the contract lifecycle while the rest focus on an end-to-end solution. For lawyers with law firms and in-house legal departments, that means they currently have many products that solve their CLM pain points with slight differences in terms of features, usability, and pricing.

This difference isn’t enough to justify the range of options on the market, though, or the amount of money being spent on funding them.

The legal market simply can’t sustain this many CLM providers, and consolidation has already begun and is likely here to stay.

Most recently, in August, Conga acquired Contract Wrangler, saying the deal would help companies gain actionable insights and to complement the Conga commercial and revenue operations solutions. [6] This deal followed DocuSign Inc.’s May acquisition of Clause, which it said was intended to integrate its technology into a broader cloud-based smart contracts platform. [7]

Also in May, Mitratech Inc. acquired ContractRoom to provide end-to-end CLM capabilities. [8] The transaction followed Ironclad’s March acquisition of clickwrap transaction platform PactSafe, to expand digital contracting. [9]

Among deals a year earlier, Onit acquired AXDRAFT, [10] Apptus acquired Conga [11] and DocuSign acquired Seal Software Ltd[12]

These deals followed Coupa’s 2019 acquisition of Exari [13] and the 2018 DocuSign acquisition of SpringCM and development of DocuSign Gen. [14]

A CLM Consolidation Checklist for Law Firms and In-House Legal Departments

With the CLM market definitely entering a consolidation period, that makes choosing the

right provider even more important. Law firms and in-house legal departments should be prepared in case their CLM gets acquired. Nobody has a crystal ball to pick the right horse in this race, but customers invest a lot of time and budget into CLMs, and should be prepared for this.

Those currently evaluating a CLM should not shy away from asking questions regarding consolidation. There should be clear answers given, or at least a sense of how continuity will be maintained. For law firms and in-house legal departments currently under contract with a CLM that find out their provider is being acquired, this is a quick checklist to go through in a review meeting:

  • Is the platform going to change?
  • What is the technology stack as a result of this consolidation?
  • Can the consolidated entity provide a product road map?
  • Are there going to be additional features as part of the CLM consolidation?
  • Are these features available to use immediately?
  • What is the change management strategy?
  • Will there be training and support provided through this consolidation effort?
  • Is the user interface going to change?
  • If there is migration, what is the process for data migration? Could you share the migration plan?
  • Will my dedicated account manager oversee this consolidation?
  • What will pricing look like as a result of this?

Conclusion

With CLM consolidation already happening, and more likely ahead, law firms and in-house legal departments that rely on this technology must stay informed.

What this means is being prepared for different prices, new features and updated technology, UI changes and any internal training that has to be done.

This is not all negative, either. Consolidation can offer customers the chance to enjoy a range of options they didn’t previously have access to. That will only benefit end users and will likely further cement the place of CLM technology in the day-to-day functioning of law firms and in-house legal departments.


Naseeha Machingal is a lead for client success and partnerships at LegalEase Solutions LLC.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the organization, its clients or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.


[1] https://techcrunch.com/2021/10/27/incloudcounsel-raises-200m-rebrands-as-ontra-to- expand-its-automation-tools-for-contract-management/.

[2] https://www.prnewswire.com/news-releases/contractpodai-raises-115m-in-growth- funding-led-by-softbank-vision-fund-2-to-shape-the-digital-transformation-of-the-legal- industry-301388490.html.

[3] https://www.prnewswire.com/news-releases/ironclad-raises-100-million-series-d- funding-round-to-scale-the-new-standard-for-business-contracts-301208177.html.

[4] https://www.globenewswire.com/en/news-release/2021/02/23/2180585/0/en/Evisort- Raises-35M-Series-B-Led-by-General-Atlantic-Quadruples-Revenue-As-Enterprises-Race-To- Tame-Contracts.html.

[5] https://www.businesswire.com/news/home/20210714005524/en/LinkSquares- Announces-40-Million-in-Series-B-Funding-Led-by-Sorenson-Capital.

[6] https://www.businesswire.com/news/home/20210817005180/en/Conga-Acquires- Contract-Wrangler.

[7] DocuSign acquired Clause, to integrate its technology into a broader cloud- based smart contracts platform.

[8] Mitratech acquired ContractRoom to provide end-to- end CLM capabilities.

[9] https://www.prnewswire.com/news-releases/ironclad-announces-pactsafe-acquisition- and-the-new-standard-for-digital-contracting-and-acceptance-301255830.html.

[10] Onit acquired AXDRAFT that enables in-house counsel to draft legal documents 10 times faster.

[11] https://conga.com/press/apttus-and-conga-combine-become-leader-digitally- transforming-commercial-operations.

[12] DocuSign acquired Seal Software to leverage Seal software’s analytics, discovery and data extraction services.

[13] Coupa completed the acquisition of Exari to offer contract creation, collaboration, and discovery functionalities..

[14] DocuSign acquired SpringCM and developed a new contract management solution called DocuSign Gen. DocuSign Gen enables Salesforce users to automate, simplify, and streamline the contract review process.

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