Private-equity firms are pouring billions into legal tech. Here's where 10 investors see the biggest opportunities for disruption.

PE firms investing in legal tech2x1

Summary List Placement

General Atlantic

Legal tech investments: Evisort

Growth equity giant General Atlantic, which has invested in buzzy fintech startups like Albert and Chime, made its first foray into legal tech in February, leading the $35 million Series B of Evisort, a contract life cycle management company.

“Prior to COVID, the legal landscape was a traditional, paper-based industry ripe for disruption,” said Alex Crisses, a managing director at the firm. “We see the automation of contract management and the utilization of AI in a legal tech capacity as one of the great themes of 2021 and beyond.”

General Atlantic looks for investments in technology that are “highly differentiated,” Crisses told Insider. Crisses said Evisort’s tech covers a wide range of use cases, can be speedily implemented, and ultimately delivers strong return on investment. “This is a classic space for AI disruption,” he said.

Hg

Legal tech investments: Litera, Septeo, Mitratech, Doxly, STP, Allegory Law, Litera, Eclipse Legal Systems, Acuity ELM

Hg, a specialist private equity investor focused on software and service businesses, has made 11 investments in the legal and regulatory compliance tech space across Europe and North America, with over $1.8 billion invested in the sector to date. Current big-name investments in the legal tech space include Litera, a legal workflow software company, and Mitratech, a legal management system.

Legal tech is “critical” given “how litigious” the market is, said Ben Meyer, a partner at Hg. The US has an approximately $500 billion legal spend market, with law firms in particular shelling out around $5 billion per year on IT, according to Meyer.

Hg’s investment strategy is to identify a “sub-niche” and then to build a leader in that sub-niche. In June 2019, for instance, Hg bought Litera, with plans to invest $42 million in the company. At the time, Litera was a “skilled player” in law firm document workflow, collaboration, and data management solutions. “But that sub-niche was very fragmented with a lot of different point solutions, and it was complex and frustrating for CIOs,” said Meyer. “We took the approach of: Is there an ability to act on behalf of the CIO and stitch these point solutions together into a consolidated platform?”

Vista Credit Partners

Legal tech investments: Rocket Lawyer, Mitratech, Aderant Holdings, Zapproved

Vista Credit Partners made waves in the legal tech community when it led Rocket Lawyer’s $223 million growth capital financing in April. Rocket Lawyer provides small- to medium-sized businesses with online legal services like contract review and real estate agreement. Vista decided to invest because the company offers a “highly differentiated product, compelling growth characteristics, attractive unit economics, and an incredible value proposition,” David Flannery, president of Vista Credit Partners, told Insider.

Vista has also invested in Mitratech, a legal and compliance platform; Aderant Holdings, a business management software platform for law firms; and Zapproved, an ediscovery software for in-house counsel.

In addition to legal service procurement companies like Rocket Lawyer, Flannery said he is especially bullish on ediscovery, which “has long been a time- and services-heavy proposition. With advancements in artificial intelligence and machine learning, we’re seeing the e-discovery ecosystem change rapidly.” 

Ontario Teachers’ Pension Plan

Legal tech investments: Mitratech

Ontario Teachers’ Pension Plan, the largest single-profession pension plan in Canada, acquired a majority stake in Mitratech, an end-to-end legal and compliance software platform, in March for an undisclosed amount.

“Enterprise software has been a key focus area for our technology sector team,” said Karen Frank, Ontario Teachers’ global head of equities. “We continue to focus on new and emerging sub-sectors within enterprise software…legal tech solutions are often critical for the success of the enterprise.”

Frank said Mitratech “stood out” for its scale, product suite, and potential for accelerated organic and inorganic growth. Since Ontario Teachers’ investment, Mitratech has added two companies to its ever-growing platform: AdvanceLaw, a marketplace for general counsel, and ContractRoom, a contract life cycle management provider.

Silver Lake

Legal tech investments: Relativity

Silver Lake made waves in the legal tech space in March when it became ediscovery giant Relativity’s largest shareholder, valuing the company at $3.6 billion. The details of the deal, including the size of Silver Lake’s investment, were not disclosed.

“Relativity is not only the clear leader in software for the legal sector, but also an increasingly strategic company in enterprise technology generally,” said Joe Osnoss, managing partner of Silver Lake, in the press release when the deal was announced. 

The strategic investment was aimed to help Relativity “accelerate” its offerings to the Am Law 200 firms, according to the release. Relativity is Silver Lake’s only legal tech investment so far. The firm declined to comment for this story.

GI Partners

Legal tech investments: Consilio, Advanced Discovery, DiscoverReady

The private equity team at the investment firm GI Partners invests primarily in healthcare, IT infrastructure, services, and software companies. The legal tech space has “software players and services players” that “sit at the nexus of technology,” enabling them to own customer relationships, said Mike Stuppler, a principal at GI Partners.

In 2018, GI Partners bought and merged Consilio, which Stuppler said was third in the ediscovery market at the time, and Advanced Discovery, another ediscovery provider. Before the firm sold Consilio in April this year, it also acquired Discover Ready, further boosting its ediscovery services. 

“We’re looking for business that have multiple levers for growth,” like M&A opportunities and product development, Stuppler told Insider. “For ediscovery, we wanted to find a player of scale. The issue was that a lot of the players, like KLDiscovery and Epiq, had already traded hands. So we felt that in order to do it, we had to create it.”

Knox Capital

Legal tech investments: HaystackID, a360inc, Bundle, Collabtech, Bodhala, Prevail, Authenticity.AI

Knox Capital, which targets legal tech and other tech-enabled middle-market companies, has made investments in companies like ediscovery platform HaystackID, and Bundle, an online service that provides real estate legal documents. 

“The legal tech market has all of the characteristics that investors look for. It’s a smaller version of healthcare tech and fintech,” said Mike Bryant, a partner at Knox Capital. “As you study the market, you realize how big the problem is to be solved — how big the legal market is.”

When it comes to investing strategies, Knox Capital’s is to catch a company that’s “growing — maybe not currently a pace they feel they can grow at — is generally profitable, and intuitively know they need help to get to the next level, whether it’s through capital, M&A, or global expansion,” said Bryant. After the firm invested in HaystackID in 2017, for instance, Knox Capital helped the company acquire three companies, enabling it to expand from $15 million to $75 million in revenue.

K1 Investment Management

Legal tech investments: Reveal, Brainspace, Onit, Litera 

K1 Investment Management invests in enterprise software companies. In January, it gave $200 million to Reveal, an AI-powered ediscovery platform, which had just merged with Brainspace, a visual analytics platform used for digital investigations.

“The ediscovery market is undergoing rapid change and K1 is excited to partner with the Reveal and Brainspace teams to create the category leader in the industry,” said Tarun Jain, vice president at K1, in a statement.

Wendell Jisa, the CEO of Reveal, previously told Insider that it planned to use the capital to boost hiring and make more acquisitions.

K1 has also fueled the growth of other legal tech companies like Onit, an enterprise workflow platform that snapped up $200 million from the PE firm in January 2019. The firm also bought Litera in July 2016 before selling it to Hg for an undisclosed amount in May 2019. During its three years with K1, Litera tripled its revenue and more than doubled its product portfolio, according to the company’s statement. K1 did not respond to requests for comment.

TA Associates

Legal tech investments: Mitratech, LegalZoom, Eclipse Legal Systems, Acuity ELM

TA Associates has invested in several prominent legal tech companies, including LegalZoom, an online platform that connects small businesses and consumers to legal services, and Mitratech, which it held a minority interest in before selling it to Ontario Teachers’ Pension Plan in March.

The PE firm had “been tracking the evolution of the entire legal software market for years and the strategic expansion of the General Counsel’s role in particular,” said Hythem El-Nazer, a director at TA Associates, in the press release announcing its original investment in Mitratech in 2015.

The firm did not respond to requests for comment.

Leeds Equity Partners

Legal tech investments: Exterro

Leeds Equity Partners invests exclusively in what it calls “knowledge industries,” including software and information services. To date, it’s deployed $2.7 billion, according to its website. In 2018, the firm invested an undisclosed amount in Exterro, an ediscovery and information governance software platform used by Visa and American Express.

Since receiving Leeds’ investment, Exterro has grown its business by acquiring the digital forensics firm AccessData in December 2020, and is now eyeing a “unicorn” IPO, Exterro’s founder previously told Insider.

“Given Exterro’s history of product innovation, differentiated market position and strong financial growth profile, we are excited about the opportunity to accelerate our investment in product innovation and meeting the ever changing needs of our customers in new and differentiated ways,” said Kevin Malone, principal at Leeds Equity, in a press release announcing the acquisition.

The firm did not respond to requests for comment.

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