Minimize risk, maximize speed — Private equity NDA management with AI

February 21, 2024

Traditional methods of managing non-disclosure agreements (NDAs), also known as confidentiality agreements, simply don’t cut it for fund managers at fast-paced firms anymore.

Manual review by your internal legal teams is time-consuming and takes you and your colleagues away from high-value work. Outsourcing to external counsel isn’t always a much better option. It’s often a slow and expensive process in the long run, and the junior associates handling NDA negotiations might agree to off-market and inconsistent terms.

AI-powered NDA management software — like Ontra’s Contract Automation — offers an efficient and cost-effective solution to traditional NDA outsourcing options.

Here’s how you can improve efficiency, reduce costs, and relieve employee bandwidth via AI-powered NDA automation with Ontra.

Discover how Safehold reduced time spent on NDAs by 50%

Private equity boom and competition drive up NDA volume

Despite lower deal volume and exits in 2023, the private markets have grown significantly over the decades. Assets under management and dry powder are higher than ever, and there are more private fund managers competing for deals than even just a few years ago. This growth and competition forces fund managers to review a greater number of target companies for every deal they complete. That means more NDAs.

Rising NDA volumes are particularly felt by the top alternative investment firms that review a high volume of investment opportunities, which they need to turn around quickly, while ensuring internal consistency. To achieve this, firms need significant internal resources or an external provider, like an outside law firm or an alternative legal service provider.

Pitfalls of traditional NDA management in private equity

Manual NDA negotiations are a labor-intensive process requiring significant time and resources. Each potential deal demands professionals spend hours turning around markups on these routine contracts. When outsourced to external counsel, NDAs typically go to junior associates yet are billed at a standard rate, allowing costs to accrue quickly.

Regardless of whether your firm manages NDAs internally or externally, manual NDA negotiations tend to drag on, which prevents you from gaining a competitive edge by accessing data rooms and beginning diligence sooner.

Ultimately, there are consequences to a slow or mismanaged NDA process.

58% of respondents said the NDA process at their firm negatively impacted their ability to close a deal over the past year.
Ontra + Wakefield Research Survey
A Perspective on the Private Markets

Additionally, traditional NDA management introduces room for errors like:

Inconsistent language: NDA inconsistencies can make the agreement ambiguous, unenforceable, or open to interpretation. The more common issue for private equity firms, however, is more complex compliance efforts. If your firm’s wealth of NDAs creates a jigsaw of obligations, your team likely has a harder time keeping track of requirements and complying with and enforcing each agreement. More consistent terms across your NDA can be an advantage in monitoring contract compliance and preventing confusion or disputes.

Off-market provisions: Contract terms that deviate from market norms can lengthen NDA negotiations when the other party’s expectations are based on standard industry practices. In the worst-case scenario, negotiations break down, prematurely ending the deal process.

Even if your firm has established guidelines or playbooks, you might struggle to stick to predefined contract terms across manual NDA negotiations. This is common for firms that lack centralized storage and accessible, structured contract data. Visibility challenges can lead to unnecessary problems and delay contract turnaround times.

Benefits of managing NDAs with Contract Automation

Ontra’s NDA management solution combines the efficiency of AI and industry expertise to provide PE firms with a modern, streamlined solution to redefine traditional NDA management. With the transformative power of AI, here are some key benefits of managing NDAs via Contract Automation:

Speed: Ontra’s Markup Builder feature, powered by Ontra’s AI engine, Ontra Synapse, surfaces language from previous, similar documents for the same customer. This type of automation allows the firm’s dedicated lawyer to negotiate and execute routine contracts faster than is possible with traditional methods — and faster NDA turnaround times mean that firms can begin due diligence sooner, streamline decision-making, and close on high-caliber assets faster.

Industry expertise: Ontra pulls data from over one million contracts processed through our platform to build a standard NDA playbook made up of market-appropriate preferred and fallback contract provisions. Additionally, after your firm signs an NDA through the platform, AI generates a summary of key terms. We believe current AI capabilities still require a “human in the loop,” so an independent legal professional reviews the summary, ensuring that your firm can be confident in the accuracy of your reporting and contract analytics.

Improved visibility: Firms can view the status of all their contracts in Ontra’s secure, centralized platform. They can see their dedicated lawyer’s work on the contract, ensuring they’re receiving markups in a timely manner.

Data-driven insights: AI captures and categorizes contract data to provide dynamic reports in Ontra’s Contract Automation platform. This allows firms to access structured contract data without manually managing databases or sifting through prior contracts.

Cost savings: Firms that use AI-powered tools to automate their NDA negotiations benefit from lower and more predictable fees compared to in-house manual management or outsourcing to a traditional law firm.

Ready to better manage private equity NDAs?

Gone are the days when private equity firms could lean on manual processes and in-house resources to manage NDAs effectively. Firms that don’t have the right solution to handle NDAs can experience process inefficiencies, high costs, and subpar outcomes.

Ontra offers a cutting-edge solution designed to optimize legal workflows for the private markets. Contract Automation combines AI NDA management software, comprehensive digital playbooks, deep industry expertise, and a global legal network to efficiently deliver consistent, high-quality NDAs to leading PE firms.

Nonantum Capital saved 1,000+ hours by shifting NDAs to Ontra

Additional Resources

Ontra is an alternative legal services provider. We are not a law firm and do not provide any legal services, legal advice, or referral services and, as a result, we do not provide any legal representation to clients, nor do we participate in any legal representation of clients. The contents of this article are for informational purposes only, and are not intended to constitute or be relied upon as legal, tax, accounting, regulatory, or other professional advice, opinion, or recommendation by Ontra or its affiliates. For assistance or guidance regarding the impact or applicability of the topics discussed in this article to your business, please consult your legal or other professional advisers.

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