Battle of the Robots for law firm business
Robert writes
It is normally frowned upon to suggest that experiences from the past might be indicators of outcomes in the future. The problem is that invariably to follow that line runs a significant risk of naivety, for want of understanding that history does indeed frequently repeat itself, and humans are inclined to repeat their own mistakes, as they search to replicate their successes from the past. It was, therefore, noteworthy that the global US-based law firm, Cleary Gottlieb, has acquired the small London-based AI-focused startup, Springbok AI, the latter described in The Lawyer as “a challenger to the Harvey hype”, begging the question as to Harvey’s own potential success or otherwise. Of the acquisition, Outsell’s Hugh Logue generalises somewhat, in my view, that the acquisition “signifies a landmark move when legal services stopped consuming technology and started competing on it”. It might be so, but it would be a surprise, certainly to me; we have been here before.
In Germany, there has been the announcement that a legal technology startup, Xayn (soon to be Noxtua SE), has raised approximately €80.7 million of investment funds from C.H.Beck, Germany’s leading legal publisher, as the leading investor, but also from law firms, CMS and Dentons. C.H. Beck’s head of legal technology comments that “In the future, we will offer our customers not only high-quality content and research capabilities, but also comprehensive productivity solutions for their legal work”. There is good reason for healthy scepticism, when it comes to the PR pronouncements of law publishers.
The logic of law firms investing along the supply chain to acquire the tools of their trade is not new; equally so is the reverse notion that legal information providers should “cut out the middleman” and embrace legal advice-giving. Things do not always work out as planned, it would seem, or rather, the status quo of the more powerful party tends quickly to be re-established.
For many years, the French-based law and tax publishing business of Editions Francis Lefebvre had, alongside its core business, a similarly-branded law firm and an accountancy firm. Their subsequent expansion has been on the professional information and software side, as the advice businesses were abandoned. In Britain, in 2013, Jordan’s, a long-standing law publishing and corporate services business, established, out of its corporate side, a law firm called Jordans Law. It was an innovative step, the logic of which could be understood. By 2015, Jordan Publishing had been sold to Lexis Nexis, thereby separating law publishing from legal services and in 2016 the rest of Jordans was sold to Vistra, later to be renamed Vistra; again, the status quo was established.
The purpose of a law firm, at its most basic, as with other commercial entities, is, more than likely, I would imagine, to make as much money as it can, so it will inevitably try whatever is possible and lawful to achieve that objective. Perhaps, the enviable challenge for the giant firms is that they can be hugely profitable from advice services, so that other activities are not so attractive in the long run, not least because the firms are run by lawyer-partners who think like lawyers and prioritise what they know best. Hence, peripheral activities tend not to match up as profit generators and are relegated to back-office functions, where entrepreneurship is often sent to die, rather than to operate as profit centres.
Of course, a niche acquisition target can be extremely appealing if it has succeeded in gathering, in consequence of innovative products, optimum pricing and service standards, a clutch of appealing customers which its acquirer would like to have, in order to grow revenue and margin, but might, in other circumstances, might find it difficult to do so. Buying the customer base might be a cost-effective way of achieving growth for the core business. Within a short time, the acquired business can become invisible, and things go on as before.
Read his full article at Slaw
