The Prospect of Law Firms Acquiring Their Information and Software Suppliers: Collaboration and Integration (Almost) Everywhere

It is normally frowned upon to suggest that experiences from the past might be indicators of outcomes in the future. The problem is that invariably to follow that line runs a significant risk of naivety, for want of understanding that history does indeed frequently repeat itself, and humans are inclined to repeat their own mistakes, as they search to replicate their successes from the past. It was, therefore, noteworthy that the global US-based law firm, Cleary Gottlieb, has acquired the small London-based AI-focused startup, Springbok AI, the latter described in The Lawyer as “a challenger to the Harvey hype”, begging the question as to Harvey’s own potential success or otherwise. Of the acquisition, Outsell’s Hugh Logue generalises somewhat, in my view, that the acquisition “signifies a landmark move when legal services stopped consuming technology and started competing on it”. It might be so, but it would be a surprise, certainly to me; we have been here before.

In Germany, there has been the announcement that a legal technology startup, Xayn (soon to be Noxtua SE), has raised approximately €80.7 million of investment funds from C.H.Beck, Germany’s leading legal publisher, as the leading investor, but also from law firms, CMS and Dentons. C.H. Beck’s head of legal technology comments that “In the future, we will offer our customers not only high-quality content and research capabilities, but also comprehensive productivity solutions for their legal work”. There is good reason for healthy scepticism, when it comes to the PR pronouncements of law publishers.

The logic of law firms investing along the supply chain to acquire the tools of their trade is not new; equally so is the reverse notion that legal information providers should “cut out the middleman” and embrace legal advice-giving. Things do not always work out as planned, it would seem, or rather, the status quo of the more powerful party tends quickly to be re-established.

For many years, the French-based law and tax publishing business of Editions Francis Lefebvre had, alongside its core business, a similarly-branded law firm and an accountancy firm. Their subsequent expansion has been on the professional information and software side, as the advice businesses were abandoned. In Britain, in 2013, Jordan’s, a long-standing law publishing and corporate services business, established, out of its corporate side, a law firm called Jordans Law. It was an innovative step, the logic of which could be understood. By 2015, Jordan Publishing had been sold to Lexis Nexis, thereby separating law publishing from legal services and in 2016 the rest of Jordans was sold to Vistra, later to be renamed Vistra; again, the status quo was established.

The purpose of a law firm, at its most basic, as with other commercial entities, is, more than likely, I would imagine, to make as much money as it can, so it will inevitably try whatever is possible and lawful to achieve that objective. Perhaps, the enviable challenge for the giant firms is that they can be hugely profitable from advice services, so that other activities are not so attractive in the long run, not least because the firms are run by lawyer-partners who think like lawyers and prioritise what they know best. Hence, peripheral activities tend not to match up as profit generators and are relegated to back-office functions, where entrepreneurship is often sent to die, rather than to operate as profit centres.

Of course, a niche acquisition target can be extremely appealing if it has succeeded in gathering, in consequence of innovative products, optimum pricing and service standards, a clutch of appealing customers which its acquirer would like to have, in order to grow revenue and margin, but might, in other circumstances, might find it difficult to do so. Buying the customer base might be a cost-effective way of achieving growth for the core business. Within a short time, the acquired business can become invisible, and things go on as before.

Another possible barrier in such a scenario might be that if the succulent new customer base comprises competitors, for example, in the case of law publishers, other providers, or for law firms, other firms, it may be the case that those customers will not want to trade with a competitor, both to enrich them and to reveal information, data and secrets that should not be shared. The risk is that the customer base which comes with the plucky little acquisition quickly disappears, rendering the acquisition redundant and disappointing.

As to the acquisition deal to which reference is made, I know little of the parties concerned or the rationale and logic that lies behind it; it may well be inspired, and any support or criticism from me is a complete irrelevancy. However, I have witnessed many acquisitions by large entities in and around law practice and legal information provision, so as to observe that they do not always succeed, as, perhaps, Thomson Reuters’ recent disposal of FindLaw suggests. In the case of the acquirees, indeed, the people who lead them may be enriched, or they might even secure executive positions within the acquiror businesses, but this is less likely to be the case, in the long run, further down the hierarchy. From my own disinterested experience, I wish that law firms did better jobs of advising on the law and that law publishers and legal information tools’ providers did likewise in their respective fields. Mixing it all together successfully must certainly be quite a challenge.

Yet, with all the provisos and qualifications in place, as I see it, the likes of Thomson Reuters and RELX, however evil and avaricious they both are, will be the winners in the present jostling for standing in their particular markets. In that context, it will be interesting to observe the battle for market share between RELX’s Decisis and vLex Fastcase, in the US market. Particularly if vLex’s Dan Hobson is correct, that the future of legal technology will centre on integration and collaboration among vendors, rather than law firms trying to be technicians and technicians trying to be law publishers, the existing legal information and software behemoths, however evolved, seem to be perfectly positioned to triumph, warts and all, once the calculations are done. On the law publishing side, at the level and scale of Thomson Reuters and Microsoft collaborating over professional workflow, issues of reputation, market share and reach serve to reinforce the logic. At lower levels, it is certainly intriguing to watch the extent to which, even after many years, the software providers have a continued need to collaborate with and feed off the specialist legal publishers in order to attempt to flourish. We see another of several content deals by vLex, the latest being to host legal content from Informa’s Taylor & Francis. I wonder if this is some of the same content that that was already licensed to Maritime Insights and Intelligence Ltd., when i-Law was sold by Informa? It might be noted that Lexis Nexis/RELX and Thomson Reuters seem not to have the same need to generate licensing fees by letting their legal content be hosted by lesser would-be competitors; their coffers are full from even more lucrative sources. Love them or hate them, their more than two centuries of sustained success is not by accident. Professional publishing historic profits derive from the fact that the market leaders were judged by customers on quality, features and the benefits derived from using their products and services, rather than on price, which is enviable. The more commoditised legal content becomes, the less it will be valued. Still, I think that they will be around for so long as it suits them, maybe even deservedly.