Ontra CEO and founder, Troy Pospisil, spoke with StrategicCIO360 about the costs of insourcing contracts.
PE firms: Do your general counsels need legal tech?
The private equity industry and its players are evolving. One aspect of that change is the growth of in-house legal teams in PE firms. Large asset managers have had internal legal teams for years, while smaller firms heavily relied on business professionals and outside counsel.
But as PE firms grow in terms of assets under management and sophistication, they’re bringing in general counsels to oversee legal tasks, employment issues, compliance, and deals.
In-house lawyers can help PE firms address risk and generate value for investors. But for firms to benefit fully from an in-house legal department, they need to invest in legal technology. Adopting the right tech allows GCs to become value centers instead of cost centers for their firms.
5 Reasons why in-house legal departments need legal tech
1. Rely less on outside counsel
While PE firms will continue to work with outside law firms, they often want to reduce their monthly invoices. Building a legal team with the right technology enables firms to perform more tasks in-house and limit how much work they send to outside counsel. This transition can save the firm time and money.
2. Boost efficiency
Even as the private markets adjust to rising interest rates, supply chain issues, the Ukraine-Russian war, and other global events, there’s still plenty of work to be done in terms of fundraising, sourcing deals, and ensuring compliance. PE firms tend to have lean legal teams, and each lawyer and staff member wears many hats. These teams need tech to help them be efficient and productive to meet the firm’s expectations and reduce the risk of burnout.
3. Support remote work capabilities
COVID-19 changed the financial services and legal industries. The pandemic and stay-home orders forced a shift from traditional office culture to remote work. PE firms had to be agile and adopt technology that allowed their lawyers and business professionals to communicate, collaborate, and maintain productivity as a distributed team. While many employees have returned to their offices to some degree, remote work is here to stay.
4. Drive value for the firm
In-house legal departments don’t have to be cost centers for PE firms. Instead, legal technology and data give GCs the ability to drive value for their firms. With the right technology solutions and vendors, GCs can analyze investment, contract, and other business data, and use the insights to pursue greater productivity and growth for the firm.
5. Support the firm’s growth
Not every PE firm strives for the size and AUM of KKR and Blackstone. Yet growth is always top of mind. In-house legal teams with the right tech and ability to analyze data can help their firms gain new investors, launch new strategies, and enter new markets while mitigating risk.
What to include in your GC’s tech stack
GCs of PE firms need the same basic tech solutions all businesses rely on at this point — Microsoft Office Suite and an email platform. But in-house teams can’t rely on Word, spreadsheets, and email alone if they hope to be as efficient and productive as possible.
Collaboration during remote work is essential. Firms should adopt one or more collaboration tools, such as Slack, Teams, or Zoom. Coworkers need the ability to communicate quickly and hold meetings among themselves, with investors, and with other business professionals.
A document repository
In-house teams benefit from adopting document management and contract management software. Firms should have central, cloud-based repositories instead of saving business contracts and legal documents on various devices. A cloud-based repository with a good vendor is secure, and employees can access and search for agreements from anywhere. By digitizing and consolidating contracts, firms also improve their ability to take advantage of contract-related data.
A contract lifecycle management solution
Firms should also consider implementing a robust CLM solution, including outsourcing some contract-related tasks. PE firms tend to handle a high volume of routine contracts, such as non-disclosure agreements, which take lawyers and business professionals away from mission-critical tasks. A thoughtful investment into a CLM solution that uses artificial intelligence and automation can improve efficiency and, more importantly, mature and grow with the firm. With a solution like Ontra’s contract automation, in-house lawyers and deal professionals can spend less time on routine contracts and more time on mission-critical tasks.
A subject matter resource
Legal teams need access to a legal research platform, such as Westlaw, LexisNexis, Bloomberg Law, Fastcase, or Casetext. Being able to perform in-depth legal research in-house is another way to reduce reliance on outside counsel.
A time tracker
In-house lawyers might not bill by the hour, but it may still be important to track their time spent on various tasks. By measuring and analyzing time spent on different legal tasks, GCs can evaluate their team’s productivity and determine if routine tasks are taking up too much of their lawyers’ time.
Legal spend management software
The best way for PE firms to track what they spend on outside counsel is through legal spend management software. A legal spend solution lets in-house teams track how much work they send to outside counsel and forecast future spend. This data enables firms to make data-driven decisions regarding what to keep in-house vs. send to outside counsel and whether to reevaluate their fee arrangement.
PE firms with lean teams might combine the role of GC with the chief compliance officer. When in-house legal is in charge of contract and regulatory compliance, then the department should have an effective compliance solution. The private markets are in the midst of a regulatory evolution, and firms must not only meet current requirements, but also prepare for heightened scrutiny and new rules.
Firms may benefit from separate contract compliance and regulatory compliance solutions. Meeting investor obligations is a top priority for PE firms, and Ontra’s Insight solution enables firms to digitize their fund documents, assign obligation-related tasks, and benefit from automatic notifications.
Communications archiving and monitoring
PE firms should archive and monitor email, instant messages, voice messages, social copy, email marketing, and other content for compliance purposes. Monitoring the firm’s communications is essential to mitigate risk, meet regulatory compliance requirements, and analyze data to inform business decisions.
A password manager
It’s impossible to build an in-house legal team’s tech stack and not consider basic cybersecurity measures. A password manager is a simple way to encourage employees to use strong, unique passwords for each software solution.
The next step in building your tech stack
PE firms should purchase tech solutions that solve their particular pain points, which will depend on their size, current strategies, and goals. Smaller firms are often less in need of comprehensive tech stacks. However, as firms grow and hire in-house counsel, advanced technology enables their employees to work efficiently and create value for the firm and its investors.
In implementing tech solutions, firms should consider whether they’d benefit from partnering with a B2B service provider. For instance, firms tackling a high volume of routine contracts might be interested in contract automation as part of their contract management solution. In this case, the firm can look for an alternative legal services provider that offers a more advanced technology solution rather than purchasing off-the-shelf software.
Learn about contract automation
Speed up dealmaking and increase closed deals by building an AI-driven tech stack.