Unlocking data from PE contracts is a piece of cake

November 8, 2023

There’s a wealth of information hidden in contracts. For instance, with a contract intelligence solution, private equity firms can compare language across specific contract types. They can run reports to see the evolution of terms over the years or to evaluate market terms in various jurisdictions.

Ultimately, PE firms and their lawyers can leverage their contract data to take stronger positions and accelerate future negotiations. To do so, though, they first need to digitally transform their contract management process.

Read on to learn the six crucial steps firms should take to unlock valuable data in their contracts, from private equity NDAs to side letters and LPAs.

6 steps to unlocking data from private equity contracts

To take a more interesting approach to an often dry subject, think of digitally transforming contracts as similar to baking a chocolate cake. Whether a novice or professional, every baker takes specific, intentional steps to achieve their desired outcome. PE firms can do the same to benefit from their contract data.

Let me explain…

Step 1: Choose a comprehensive contract management solution

The first step in baking a chocolate cake is gathering the necessary tools, such as a mixer, a bowl, spatulas, and cake pans. Similarly, before PE firms can benefit from their contract data, they need to identify the right tool — a software solution. They’ll need document processing to turn their hundreds (or thousands) of PDFs and Word files into a digital, structured, and categorized dataset.

Though they could select from standalone document processing solutions and services, PE firms are better off searching for a purpose-built, comprehensive contract management solution that’ll offer digitization, a central repository, task workflows, and contract analytics.

Step 2: Outline your implementation plan

After finding a suitable contract intelligence solution, PE firms benefit from outlining the implementation steps as well as a realistic timeline. In baking terms, this is reading the recipe all the way through before mixing any ingredients. Bakers should know what comes next, from beginning to end. Now, an experienced baker would say we should have read the recipe before now, but let’s not be too stiff with the analogy.

Step 3: Locate existing contracts

After reading the recipe, our baker gathers the ingredients for their chocolate cake, including cocoa, butter, eggs, flour, salt, and baking soda. They want the ingredients that’ll give them the best chocolate cake — such as a cup of espresso and Dutch-process cocoa powder — not something that’s merely edible.

Similarly, it’s essential for PE firms to locate as many historical contracts as possible in addition to their existing agreements. The more comprehensive a firm’s contract data, the more stakeholders can trust using the contract analysis results in decision-making.

Larger funds might face more complexity than they originally anticipated during this step, which is why it’s essential they consider this process when outlining an implementation timeline. Don’t be the baker who starts mixing their cake and realizes they’re out of the good cocoa.

Step 4: Digitize your contracts

Once a baker has their tools and the highest-quality ingredients, they follow the recipe step-by-step. In the PE industry, this means firms are ready to digitize their contracts and related documents and input them into the contract intelligence solution.

The purpose of digitization is to take the unstructured data in contracts and turn it into data that is categorized, formatted, and organized in a way that makes it easily searchable within a database.

A quick note here is that PE firms often require additional staffing to minimize the time spent on document processing, which is why Ontra works with a legal network of independent lawyers across the globe. When implementing Ontra’s Contract Automation platform, the legal network members can process a firm’s contracts and other fund documents.

This is the difference between a novice and an experienced baker in the kitchen. The former might move through the steps slowly, continuously returning to the recipe for guidance. The latter mixes the batter and gets it into the oven quickly and efficiently because they’ve done it a hundred times before.

Step 5: Generate reports

Now it’s time to bake. Ultimately, the quality of the cake that comes out of the oven depends on the quality of the ingredients and how carefully the baker followed the instructions. This is akin to the quality of the data and models required for accurate contract intelligence outputs.

The baker who uses the highest-quality ingredients and follows the recipe to a T will produce a delicious cake. The baker who uses the most basic, readily available ingredients and puts the batter into a malfunctioning oven will be left with a technically edible but unpleasant cake. PE firms that want accurate and insightful information have to make sure they feed high-quality contract data into a high-quality software solution to produce the best results.

Step 6: Make data-driven decisions

Finally, the baker is ready to enjoy the fruits of their labor. The cake comes out of the oven, and they can enjoy a slice. The fruits of the PE firm’s labor are accurate contract data and insights that they can use to plan future agreements and negotiation stances.

Everything you need to know about contract automation & intelligence

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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