Technology, especially artificial intelligence, is also changing the world of law firms in the field of M&A. Lawyers discuss Legal Tech with interest and excitement time and again. This was also the case at the recent AIJA Ski Seminar.
I spent the last three days together with 135 other lawyers in St. Anton, Austria, at the AIJA ski seminar. AIJA is an international association of young lawyers who deal with legal issues at numerous seminars and conferences around the world. The members also regularly discuss legal tech topics. The annual ski seminar organised by the M&A Commission is a fixed point in the AIJA calendar. In 2019 the seminar was held under the title "The future of M&A: Challenges for M&A professionals resulting from AI and Legal Tech".
As a speaker in the panel moderated by Christian Sauer on the topic of "Client Expectations", I discussed with Peter Simon (Credit Suisse) and Sameer Sah(Khaitan&Co.) the question of whether the classic M&A lawyer will no longer exist in the future. Here are some of the issues we discussed and my views on them.
Has the advent of technology, particularly AI, changed the demands of clients* vis-à-vis M&A lawyers?
The answer to this question is yes and no. The very basic expectation remains the same. Even in the age of digitalisation, clients are looking for high quality and fast service at the best possible price.
What has changed is the definition of "fast" and the demand for "quality". Through the use of technology, certain aspects of an M&A project can be completed much faster and with better quality. Where a room full of associates needs days to screen documents in an unstructured data room, good software can provide a good overview within a few hours, even with large amounts of data. But it is not only faster. Processing by such a program can also help to eliminate sources of error.
Experienced corporate clients in particular know this. The expectations of clients have therefore changed in this respect. Today, it is expected that the available opportunities will be exhausted and law firms will work as efficiently as possible. The challenge for the law firm is therefore to find a strategy and a business model that will enable it to continue to offer the best possible service at a competitive price without wasting time. This is the responsibility of each law firm. If it does not work, it means that not (yet) all the gears of the strategy machine are turning smoothly. A circumstance that can be remedied in many cases.
Is the use of an AI tool in an M&A project a selling point? Do clients take into account when deciding whether law firms use such tools?
At another seminar panel, the panelists discuss that the availability of good software for automating the due diligence process can generate interest among clients and thus boost sales. In a survey conducted by Sameer Sah at 150 in-house counsel prior to the event, the majority of participants tended not to make their choice of law firm dependent on their use of Legal Tech software.
In my opinion, the existence of such technology today can be a selling point. The development towards an increasingly digitalised way of working is just beginning and not all companies have implemented such tools yet. In many places people are still working with human intelligence and human speed. In a beauty contest, it is therefore quite a possibility for an in-house legal department to differentiate between the offers of different law firms.
But this will not remain so. Technology will only be a temporary selling point. At some point, technical solutions will become the industry standard in many areas. These standardized tools can then no longer be a criterion for differentiation. I also believe that the customer's final goal and problem solving will continue to be the focus of attention. The client is not interested in whether the law firm solves this with software as long as the output does not suffer and the price is right. The argument of using tech is therefore a rather weak one and should not be the focus of a pitch.
If the use of software (bswp. in the due diligence process) is not important to the client, can I as a law firm not do without AI etc.?
No! Even if software is not (in the long term) a selection criterion for clients, it is still essential for law firms to use these tools.
To simplify matters, the offer of an M&A firm for a project consists of the following three elements:
While the first two points are an effective part of the offer, the price is only a comparative element. No offer is per se expensive or cheap. It is only expensive if another law firm can offer the same offer at a lower price. If this happens, it usually means either that the competition can work more efficiently (probably by using tech). Or it means that the other law firm, through clever marketing, sells an actually inferior offer as supposedly equivalent.
In both cases the more expensive law firm has a problem. Companies will increasingly use tech. They will be faster and consequently cheaper. All this while maintaining (or increasing) quality. As a result, companies that still work traditionally and without smart technology will no longer have a competitive offer. They will simply be too expensive compared to other companies.
Is it conceivable that legal departments of companies work directly with Legal Tech companies and bypass the law firm?
It would be astonishing if a General Counsel were to deny this question. As parts of (large) companies, legal departments are used to increasing their efficiency. As a result, there is usually a greater level of expertise in dealing with technology and software implementation projects. Law firms have a certain amount of backlog to catch up on. Legal departments have the additional advantage that they have more support when the company reaches a certain size. In most cases they can fall back on an IT department, internal project management and other functions.
Can law firms catch up?
Absolutely. The seminar has shown that many law firms in Europe are also dealing with tech topics in depth. In comparison to Legal Tech events two years ago, there has been a great leap forward. A transformation never succeeds from one day to the next. The whole thing is a process with a learning curve and there are different ways in which companies can go digital. Like skiing, you have to start somewhere.
On the one hand, knowledge can be purchased. As a consultant, I was naturally pleased that a lawyer from a large Scandinavian law firm on another panel warmly recommended the involvement of consultants. This approach can accelerate the process. Furthermore, working with experienced experts reduces the risk of costly mistakes.
On the other hand, it is conceivable that a company acquires the knowledge itself. Many law firms have hired Junior Associates to research the topic of legal tech. The idea is actually a good one: After all, the young are usually the employees with the greatest understanding of technology. At least compared to the older senior partners.
However, these projects usually go a bit bogged down because these young lawyers are not familiar with the topic of legal tech either. Incidentally, it is also the group that often does not (yet) know the business so well. They therefore find it difficult to define the requirements placed on software. Without such a definition, all that remains for research is haphazard googling. There you will very quickly encounter a wave of marketing messages from numerous providers, which you have to classify somehow. Not an easy task. I look forward to discussing these topics further.
Even though the toboggan run was closed due to the danger of avalanches, the seminar offered the usual extensive supporting programme for networking. Whether on the slopes, at après-ski, during lunches, dinner or in the evening at the hotel bar: at AIJA there is always enough time to devote to the pleasant things in life together.
Many exciting discussions, a successful panel with interesting colleagues as well as many good conversations with old and new AIJA-Friends. It was nice to participate in an event again after three years of abstinence. With a lot of new energy and inspiration as well as some new ideas I am back in Basel.