M&A is a common occurrence in the business world, one that involves a lot of complex negotiation and contract review. In the past (and still in the present), contract review for M&A deals required a lot of man hours. Not only would legal professionals need to read hundreds – or even thousands – of contracts, but each contract could be dozens of pages or more. And the people conducting contract review aren’t just reading; they’re looking for incongruities, and potential problem areas in the text itself. Missing potential problem areas could cost a company a lot of money.
Human-led contract review can have plenty of problems of its own. Contract review for M&A due diligence is a daunting undertaking, with innumerable opportunities for costly errors. The reality of centuries of M&A law – as well as other areas of the law – is that fallible human lawyers performed the best work they could, but the process is always messy.
The Present Reality
Automated contract review can replace teams of reviewers with specially-designed software. The vast majority of contracts and other documents are digital, and optical character recognition (OCR) can digitize documents that aren’t. Then contract review platforms like our own ContraxSuite can get to work. Meanwhile, smart contract implementation – such as the efforts of Monax and the Agreements Network – is focused on transforming contracts into machine-readable documents. All these efforts haven’t come from nowhere, though. There is a reason that machines are “taking over” in the realm of contract review for due diligence.
The Near Future
Though to be clear, machines aren’t really “taking over”. There are no true robot lawyers. Instead, there is a kind of disruption of those long grinding hours that young lawyers, paralegals, and other legal professionals used to pour into tedious, time-consuming tasks like contract review.
Earlier this year, AI software trained to assess risk in contracts outperformed a group of experienced lawyers when assessing the risk of a set of documents. And you don’t have to look very hard for other articles talking about robots replacing lawyers.
Some of those articles convey apprehension, while others convey an embrace of these new technologies. Both sides have valid points of disagreement. But there is one thing all parties agree on. We are currently transitioning from what legal work used to look like, to what it will look like.
Human Intelligence + Artificial Intelligence
Technological development has never moved faster than at this point in history. Development is only part of the story, though. Finding productive ways to implement new technologies is arguably more important. Plenty of technologies are cutting-edge, yet fail to find their niche in the world. AI software is no different.
Like all tools, contract review software is making humans’ lives easier. Legal professionals can now train software to spot important clauses in a document; find areas that don’t conform to standard, proven formats; and look for small discrepancies and errors that could create problems down the road. In other words, these software tools have a niche.
This is the key. M&A due diligence is a long-winded process that could use an efficiency boost. In the past, the burden fell on humans to work long hours performing meticulous contract review. Long hours are costly, and mistakes still happen. Contract review software introduces desperately needed improvements upon the old methods. At first, this sounds like bad news for legal professionals earning their living by grinding out due diligence contract review. This zero-sum perspective doesn’t reflect how AI tools really work, though. It’s important to remember that contract review software like ContraxSuite still needs human reviewers. AI tools need human trainers, to make sure all relevant and important data points are captured and interpreted. But with the help of contract review software, legal professionals won’t need to pour so many long work hours into contract review. Instead, they’ll be freed up to perform the rigorous legal work that requires the elasticity and creativity that only human minds possess.
Toward the Future
Now, here at LexPredict we might have a biased opinion. But our acquisition by Elevate provides its own instructive example of how the landscape is changing. A law company focused on a wide range of legal services has vertically integrated software tools so that their clients will get the best quality legal work. Software has proven its usefulness time and again. But ultimately, software tools are just that: tools. Humans invent useful tools in order to work smarter, not harder. And the best tools – from fire and the wheel, to microchips and deep learning – eventually win out.