Unlocking efficiency: How private equity uses data extraction tech to streamline contracts

November 21, 2023

Private investments have grown significantly in recent years, resulting in a substantial increase in contract volumes. Private fund managers, investment banks, and their external counsel are grappling with their expanding workloads.

As the growth trend continues, efficient and streamlined processes for managing contracts at scale become crucial. Private market firms need intelligent contract automation solutions with advanced AI technology that can digitize, extract, and process data from documents. Contract automation tools are pivotal in providing data-driven insights and standardizing processes, especially for routine contracts that demand a fast and efficient turnaround.

Leading firms rely on Contract Automation

What is data extraction technology?

Data extraction is an essential component of document processing, which converts physical or digital copies of executed contracts and other documents, including NDAs, joinders, non-reliance letters, LPAs, and side letters, into structured and machine-readable data.

Data extraction tools systematically identify and gather key contract provisions such as parties, durations, and terms. The technology analyzes and converts those provisions into structured data using a blend of AI and human oversight to ensure accuracy and consistency.

A comprehensive contract automation solution stores the resulting contract data in a central repository that private funds’ legal teams can access via self-serve dashboards and reports rather than searching through individual files. Additionally, automated and customizable reports help fund lawyers view trends over time across their funds, providing them meaningful oversight across the entire contract lifecycle.

5 Benefits of using data extraction tools for NDAs

1. Improved visibility

By analyzing a large volume of private equity NDAs, legal teams can pinpoint recurring or evolving provisions. This knowledge empowers private fund managers and investment banks to stay up to date with industry standards and market trends.

2. Smoother negotiations

Extracted data and insights allow legal teams to develop more effective NDA negotiation strategies. They can proactively address common concerns and counterparties’ preferences.

3. Risk management

Legal teams can quickly surface potentially risky, off-market, or non-compliant clauses within NDAs during negotiations. Doing so prevents fund managers from inadvertently entering into agreements with unfavorable terms or legal ramifications.

4. Enhanced markup capabilities

Markup tools leverage extracted data to review previous terms and support lawyers in quickly redlining template NDAs. This approach saves lawyers time by automatically searching for historical documents and surfacing similar terms and language.

5. Streamlined legal operations

Digitization and access to structured data drastically reduce the need for manual review and data entry, enabling legal teams to rapidly handle high volumes of NDAs. This efficiency allows lawyers to redirect their focus toward higher-value tasks.

Unlock insight from precedent

A valuable benefit of data extraction technology is surfacing precedents. Using a contract automation platform, a lawyer can search across a universe of contracts and get a comprehensive view of precedent clauses within NDAs. With this information, lawyers can quickly differentiate between on-market and off-market terms.

For example, when a counterparty requests a five-year NDA term, a lawyer can query NDAs from previous deal processes, retrieving a list of relevant terms. By comparing this data to the GP’s or investment bank’s contract playbook, the lawyer can quickly confirm whether the requested term is off-market and whether a deviation from the market is acceptable. Equipped with this knowledge, the negotiating lawyer can provide a swift, data-driven response to the counterparty’s off-market request.

In addition, data extraction is a powerful tool for recognizing patterns and irregularities within a firm’s routine agreements. Contract analytics empower lawyers to adjust strategies according to past contract performance, improving the negotiation process, and informing vital business choices.

Modernize fund obligation workflows

When applied to LPAs, side letters, and other fund documents, data extraction tools can provide structured data to populate a fund obligation management solution.

A fund obligation management solution streamlines the monitoring of contractual commitments and reduces the risk of missing obligations to investors. For example, Insight, Ontra’s AI-powered SaaS solution, stores crucial obligation data in a central repository, serving as the ultimate source of truth for contractual commitments across a private fund manager’s various funds.

In-house legal teams or outside counsel can create ongoing tasks and reminders for fund obligations and assign them to relevant individuals within the organization. For instance, a lawyer can assign the task of submitting a quarterly financial statement to the firm’s CFO, along with the due date. After submitting the financial statement, the CFO can mark the task complete.

Tying tasks to obligations not only promotes timely completion but also creates an audit trail for compliance purposes. With Insight, GPs or their outside counsel can quickly export documentation of their side letter compliance or other completed tasks to support real or mock SEC exams.

Data extraction technology can accelerate private fund growth

Data extraction tools integrated into a contract automation platform can be a game-changer within contract and obligation management. Access to structured data can speed up processes, and empower legal teams to surface precedent, make well-informed decisions, and enhance compliance workflows.

Forecasts call for continued growth and digitization in private markets. Private fund managers, investment banks, and their outside counsel all face ever-increasing routine contract volumes. To thrive in today’s evolving marketplace, private equity firms must embrace digital transformation through intelligent contract automation with data extraction capabilities that unlock efficiency and insights.

Key takeaways

  • Data extraction tools identify, gather, and transform unstructured data from routine contracts into structured data during the document processing workflow.
  • Key data points from routine contracts are accessible via user-friendly dashboards, search, and reports.
  • Markup capabilities speed up first-draft redlining by retrieving similar past documents and promoting consistent terms and language.
  • Data extraction technology can surface precedents and patterns that enhance and expedite NDA negotiations.
  • Data extraction boosts efficiency and streamlines obligation monitoring and auditing.

Nonantum Capital saves over 1,000 hours by optimizing NDAs with Ontra

Additional Resources