- Welcome to Deal Making of the Future: Leveraging Technology Through the Deal Closing Process. Today we will explore how legal technology tools, also referred to as legal tech, can be used to mitigate risk throughout the deal closing process. And why now more than ever embracing technology is necessary for lawyers to stay afloat in an era of digitalization. I'm your presenter, Valerie Pennacchio. I was a practicing attorney at two AmLaw 200 firms for almost a decade. Part of my practice focused on counseling insurance companies in implementing emerging technology into their business practices. At the same time, I was growing increasingly frustrated by the manual and tedious administrative tasks performed as part of my job. Even though the firms that I worked for were heavily resourced, I just knew that there had to be a better way, and technology was the answer. So back in November of 2020, I joined a legal technology company called Litera. During my time at Litera, I wore many hats, including manager of its practice advisor team. The practice advisors are a group of former practitioners, like myself, who engage in peer-to-peer consultations with prospective and current customers, to connect the dots between the practice of law and how the company's workflow products can help. Recently I left Litera for a new opportunity that I'm very excited about. But at the time of this recording, I can't share it just yet. But please find me on Twitter @ValeriePennacchio or on LinkedIn, where I will be sharing updates, including the next leg of my legal tech journey. You'll hear me talk about workflows today; something in my experience lawyers spend little time thinking about. I was also guilty of this. But when working with legal tech solutions that streamline every part of the deal workflow, it's important to have a basic understanding of your own workflow to be able to realize the value from these types of tools. Now before I begin, I wanna make clear that the views expressed in this presentation are mine and mine alone and not of my employers. Also, although I'm still a barred attorney, I'm not your attorney, and nothing in this presentation constitutes legal advice. Lastly, you'll hear me talk about investments in legal technology, but this is by no means financial advice. Here's today's agenda. First, we will cover the acceleration of innovation in legal. I address this in my Legal Tech 101 CLE. And for those of you listening, and you may find me repeating myself. But I think it is so important to explain why innovation and legal is important, especially now more than ever. Next we will cover the standard deal workflow from due diligence to closing checklists, and document drafting and negotiation, signature management, all the way through closing books. And we'll also cover the risks associated with these activities. I will also cover current market trends and how the current state of deal making amplifies these risks. Lastly, I will provide ways in which technology can be leveraged to improve the deal workflow and mitigate these risks. So, let's get started, and look at the rapid acceleration of innovation and legal. Technology that may be a competitive advantage today will soon be just an ordinary business practice, and it is incumbent on lawyers to keep up. So let's first think about how technology has changed your practice since the beginning of your career. Did you have the benefit of Westlaw or Lexus for legal research? Did you have email or even a fax machine? Now, I am a bit younger than him, but I have one colleague who described to me how during the early days of his practice, he painstakingly redlined documents with a ruler and a red pen. Now, let's think about the past 10 years. We've moved from BlackBerries as a competitive advantage to everyone having smartphones and being hyper connected. Speaking of connectivity, we saw the advent of social media being used for the first time to support our networking and marketing initiatives. During this time, we also began to see tech assisted document review and creation. Now let's think about the past two years, and all the changes to how we approach technology and legal brought about by the pandemic, the most obvious being the use of video conferencing, like Zoom and Teams and other collaboration tools like Slack. The truth is technological advances are snowballing and will not be slowing down anytime soon or ever. Jeanne Ross from MIT is quoted as saying, "The thing that's transforming is not the technology. "The technology is transforming you." Now, I disagree in part, technology is transforming, but what is true is that technology will continue to change us, how we connect, our worldview, and our careers, whether we want it to or not. The transformation is inevitable. Arguably, the digital revolution is already upon us, and so I wanted to share a few industry non-specific statistics to keep in mind as we begin to dive deeper into how technology will transform the legal industry. First, global investment in digital transformations is expected to almost double between 2022 from 1.8 trillion to 2025 to 2.8 trillion. Digitally transformed organizations are expected to contribute to more than half the GDP by 2023, accounting for $53.3 trillion. Lastly, AI technology will be inserted into the process and products of at least 90% of new enterprise apps by 2025. Supported by increased spending on transformation efforts, the pace of technological progress is accelerating. The law of accelerated returns is an observation and term first coined in 1999 by futurist Ray Kurzweil. The law dictates that the pace of technological progress, especially information technology, speeds up exponentially over time because there is a common force driving it forward. The common force driving technological progress is computer processing power. Kurzweil's prediction is a corollary to Moore's Law, which is an observation made by Intel co-founder in 1965 that computer processing power doubles every two years. And at this point trying to stop innovation is like trying to capture rushing water in a colander. And if the past has taught us anything about the impact of technology, it is that it is imperative to keep up to stay afloat. I like to think of this as future-proofing your career. A byproduct of innovation is disruption. So what is disruption? Disruption is the radical change to an existing industry or market due to technological innovation. A disruptive product or service helps to create a new market in value and significantly weaken, transform, or destroy an existing product, market, category, industry. Now I know the term disruption evokes a negative connotation, but it's not a negative thing. It's a plus for the consumer because the result is a service that leverages technology to make the service or product more accessible and consumer-friendly. Also, it's important to note that although all disruptions in the tech space can be defined as innovations, not all innovations are disruptive or come from startups set on taking down incumbents. We should also distinguish disruption from another type of innovation known as sustaining innovation, which is when a company creates better performing products to sell for higher profits to its best customers. One example of a sustaining innovation would be a laptop computer that were sustaining innovations following personal desktop computers. In contrast, disruptive innovation generates new products, markets, and values in order to disrupt existing ones. There are many examples of disruption, but none are as dear to my heart as the rise of Netflix and fall of Blockbuster. As a child in the 90s, I spent most Friday nights at Blockbuster selecting movies for my weekend viewing pleasure, and boy, was it an experience. I remember perusing the new releases and that feeling of joy when they had enough copies of the hot ticket of the week. But there was also the converse, the disappointment when they didn't have my movie in stock, and I would be relegated to a plan B movie. Oh, and that smell. The mix of carpet and stale buttered popcorn. Did you know that there is a company out there that actually sells a Blockbuster Video store scented candle? I mean seriously, take my money now. And it is clear I am not alone in my nostalgia. So it pains me a bit to tell the story of its demise. So Blockbuster was an internationally known movie rental chain founded in 1985. Netflix was founded in 1997. CEO Reid Hastings said that after losing his copy of Apollo 13 that he rented from Blockbuster, and having had to pay a hefty late fee of $42, he saw an opportunity in a subscription model, and he also knew that DVD was on the way out. Netflix initially launched as a DVD subscription service, but very shortly after shifted gears to keep up with innovation. Hastings credits the success of the company on this flexibility, and built the company for the day he knew the internet would enable video streaming. Hastings wanted to give consumers the ability to stream films from the comfort of their homes, using a subscription service without the hassle of late fees. So what did Netflix do? Netflix took all the pain points of the old movie rental model and flipped that. No travel to a brick and mortar store, no late fees, unlimited streaming, and high quality content like "Tiger King" in the early days of the pandemic, to more recently in my personal favorite, "Love is Blind 2." Blockbuster could not keep up, and it closed its doors in 2013. And if you're interested in learning more about this, I suggest the documentary "The Last Blockbuster," and you can find that streaming on none other than Netflix. There is disruption across all industries, in the media industry, entertainment, retail, and travel industry. Disruption not only is supported by a technological solution, but it also encapsulates the seismic shift of the business model. Here are some additional examples of disruption. We have Wikipedia. Encyclopedias were written and published for profit for centuries, at least 2000 years. You'd have to buy a very expensive and voluminous hardcover copies of your encyclopedia that needed to be updated every few years. In contrast, Wikipedia is updated constantly and is available for free. After 244 years of circulation, Encyclopedia Brittanica published its final volumes in 2012. Other examples of disruption are Uber; the world's largest taxi company that owns no taxis. Airbnb, the world's largest accommodation provider that owns no real estate. Facebook, now Meta, one of the most popular media owners, owns no content. As you can see from these examples, disruption is not only supported by that technological solution. Again, it just encapsulates a seismic shift in the business model. And as I suggested before, disruption is not a negative thing. It is a net positive for the industry. One reason that it provides more growth opportunities. When you're on the lookout for disruption, you'll likely spot growth opportunities as well, even if they don't qualify as true disruptive innovation. These new sales channels, markets, or products can help you scale your company and drive more revenue. Also, disruption allows for higher customer fulfillment. Disruption occurs because it allows for better customer satisfaction, which in turn, turns into increased revenue. In tandem with increased investment in legal technology, we're also beginning to see innovation friendly reforms to state professional responsibility rules. In August of 2020, the Utah Supreme Court unanimously approved a slate of reforms that allow for non-lawyer ownership or investment in law firms and fee sharing with non-lawyers. It also permits legal service providers to try new ways of serving clients during a two year pilot period. In May of 2021, that period was extended to August 2027. Nontraditional legal service entities, referred to as alternative business services or ABSs, will have the opportunity to operate in a regulatory sandbox the state Supreme Court has established. The court has also created an office of legal services and services innovation that will evaluate and recommend sandbox applicants to the court, as well as oversee the applicants that are approved for entry into the sandbox. In March of 2021, a Utah-based registered agent company said it was launching the first entirely non-lawyer owned law firm in the United States, made possible by the state's pilot sandbox. According to a statement by the company, it's law on call service charges clients $9 a month for unlimited phone access to licensed lawyers with legal work starting at $100 per hour and no retainer. Arizona has also passed an amendment to rule 4.5 and permitted non-lawyer, non-attorneys to have an economic interest in law firms and non-lawyer fee sharing. This is key to allowing firms to raise the capital needed to innovate and adapt. Before Utah and Arizona, only the District of Columbia was the only U.S. jurisdiction to explicitly allow for non-lawyer ownership and investment in a law firm, provided that certain requirements were met under the D.C. Rules of Professional Conduct rule 5.4. However, in practice, very few ABSs have organized in D.C. At least two potential issues temper their use. Number one, many D.C. lawyers are barred in other jurisdictions and may be concerned that the formation or participation in ABSs in D.C. will constitute a violation of the rules of professional conduct in that jurisdiction. And two, the prohibition in most U.S. jurisdictions other than D.C., limits the ability of an ABS to expand beyond D.C.'s boundaries. And this may change as other states permit non-lawyer investment in ownership. Florida also announced plans to launch a three-year laboratory program modeled after Utah's regulatory sandbox. The program would allow non-lawyers to hold non-controlling equity interest in law firms. It would also ban passive ownership from outside third parties. Several other states, including New York, North Carolina, Connecticut, California, and Illinois, are at different stages of considering changes to rules prohibiting non-lawyer ownership and investment in law firms. We should also take a minute to note that non-lawyer investment in ownership and firms has been permitted in the UK, since enactment of the Legal Services Act of 2007 and since 2001 in Australia. And looking at how our friends overseas fared, it's been observed that as a result of the reform, the legal profession was jumpstarted rather than hijacked. And clients are benefiting from market competition due to new entrance, and incumbent firms are flexing their innovative muscles to keep up. Investors and owners of law firms who are not lawyers will not put up with the inefficiencies that can be part of the business of law today. Also, law firms will no longer be limited to the difficult to scale billable hour model and will have more capital and more motivation to invest in technology and will reframe the law firm business structure. With these changes to the professional rules, are we starting to see disruption in legal? Only time will tell, but we are seeing new entrants in the industry, including the big four accounting firms and alternative service providers, and contributing to the rise of consumer legal service apps. The big four are making a play for a larger piece of the legal services market, traditionally dominated by law firms. For example, in 2019, EY acquired Thomson Reuter's Pangea3 Legal Managed Services business, part of the big four firms' plan to ramp up its legal consulting services. The EY legal function consulting team is focused on helping clients improve how they operate their legal function. In July of 2020, Deloitte unveiled a new US legal business services practice, which works with in-house legal offices to stream functions that track client contracts, invoices, e-discovery, and other functions. Many lawyers perceive the big four only as tax and auditing services, but according to a 2019 Thomson Reuters report, 20% of large legal companies stated that they competed with such a firm in the last year, whereas 23% stated that they lost clients to them. In addition to the expansion of the big four into legal services, we're seeing the emergence of another new entrant into the space referred to as the alternative legal service providers, ALSPs. In its most reductive terms, ALSPs are businesses that offer services for tasks traditionally handled by law firms. ALSPs are diverse in business model and function. One example of an ALSP function is contract lifecycle management. Contract lifecycle management, CLM, is the process by which organizations create, execute, manage, and analyze their contract. ALSPs that provide CLM services support areas such as contract review, drafting, administration, and template management. Another category of ALSP are those that specialize in flexible legal staffing. As in-house teams strive to become leaner and more cost effective, by working close to capacity, they require extra support, to manage peaks in workload and cover vacancies. ALSPs that focus on staffing connect legal departments and law firms with well qualified, experienced, and often self-employed lawyers who undertake contract work. Recognizing the increasing proliferation of ALSPs, in 2020, Chambers released its first ranking report of ALSPs. Thinking about competitors and the DIY mentality, we're also seeing rise of in-house legal departments performing work like closing deals that the departments' historically retained outside council for. Stay competitive, legal teams will need to be able to better adapt to new technology, because we're seeing hyper growth in legal tech. 2021 saw record high investment in legal technology. According to Crunchbase, legal tech companies saw more than one billion in venture capital investments in 2021. This smashed the 510 million invested in 2020. The previous all time high was 989 million in 2019. The Thomson Reuters Peer Index Report found a 3.3 increase in tech spend by firms. And experts at Gartner expect legal departments to increase their spending on legal technology threefold by 2025. But firms are increasingly committing to innovations. The Altman Weil Law Firms In Transition 2020 survey asked respondents about efforts to make innovation part of firm strategy and efforts to increase efficiency. Conducted in March and April of 2019, the Law Firms In Transition survey polled managing partners and chairs at 810 US firms with 50 or more lawyers. Completed surveys were received from 362 firms, about 45%, including 49 of the 500 largest US law firms and 46% of the AmLaw200. When asked to identify what their firms were doing to make firms, technology an integral part of firm strategy, the top four responses were, one, include innovation initiatives in firm strategic plan. Two, create special projects to test innovative ideas or methods. Three, budget time and/or funds for innovative projects and experiments. And four, include innovation initiatives and practice group plans. When asked to identify efforts to increase efficiency of legal service delivery, the top four responses were, one, using technology tools to replace human resources. Two, rewarding efficiency and profitability in compensation decisions. Three, ongoing project management, training and support. And four, having a formal knowledge management program. Now, let's zoom into the use of technology for deal making specifically. About three years ago in December of 2018, Datasite released the results of a poll of 400 deal makers around the globe. According to the report, 22% of respondents said that technology was the factor driving the most change in due diligence. The report also indicated technology was poised to solve a number of problems in due diligence. Only 30% of respondents said technology would help address document, self-organization and project management, while 29% chose contract review analysis and redaction. So let's see if these 2018 predictions were correct. I realized that this is not the same group of respondents, but responses to Deloitte's 2022 future of M and A trends survey demonstrates that tech currently plays an even bigger role in M and A than envisioned just a couple of years ago, in the data site survey. And I can't help but wonder if the pandemic played into that. The Deloitte survey pulled 1300 executives at corporations and private equity investor firms in August and September, 2021, to glean insights about current deal activity and expectations for the next 12 months. A staggering 69% respondents reported that they are currently using data analytics in their diligence and monitoring. 27% are considering adding those capabilities. And also, let's face it, remote work in some capacity is here to stay; whether that be working from home or collaborating with colleagues across the firm's geographic footprint. Respondents in the Deloitte survey were asked, how do you expect to manage the following deal elements over the next 12 months? For due diligence, 57% reported that they would perform this work virtually and 26 reported that they would perform diligence work in a hybrid fashion. For transaction execution, the number was just a little bit higher, where we had 58% report that they would perform this work virtually and 23% said that they would perform that work in some hybrid fashion. And I wanna make clear that when we are thinking about applying technology to the practice of law, it is not about overhauling the entire profession, but there will always be things that can and should be streamlined with technology. The point is to create an overall better client experience, not to take away interaction from the client. And while technology improves the attorney and client experience, that alone, and that alone, yes, I agree, is a reason to embrace it. But lawyers also have an ethical obligation to stay abreast of technological advancement. And arguably, an obligation to incorporate these advancements into their business operations. Acknowledging the importance of keeping up a technological advancement, in 2012, the ABA Model Rules were revised to include a duty of tech competence. Model Rule, Professional Conduct rule 1.1, comment eight says, to maintain the requisite knowledge and skill. A lawyer should keep abreast of changes in the law and its practice, including the benefits and risks associated with relevant technology. Now I realize that this comment does not require the lawyer to use the technology. However I want to consider rule 1.5A. A lawyer shall not make an agreement for, charge or collect an unreasonable fee or unreasonable amount for expenses. So where technology can significantly reduce the time spent on legal work, arguably time billed to manually perform this work is unreasonable. Since 2012, 40 states have adopted the duty of technology competence into their rules of professional responsibility. In addition to this, two states, Florida and North Carolina require tech training as part of its CLE requirements. So the question remains, what can you do as a lawyer to keep up and future-proof your career? I say strive to be a T-shaped lawyer. In short, a T-shaped lawyer has deep legal expertise that's represented by the vertical bar of the T, but also a solid grounding in another subject represented by the horizontal bar of a T. This other field of knowledge could range from technology, business and analytics, to human resources, politics or more. The requirement of extra knowledge comes as the clients of today are demanding and expecting more. They need lawyers who can use technology to give them the most efficient and cost-effective service possible. The client wants someone who knows the world of business or the industry in which they themselves operate or require legal assistance. And while it's not necessary to become an expert coder, a hacker or a bitcoin master, lawyers of the future will need to understand how these industries align with their client's interests. The T-shaped lawyer must also have strong interpersonal and project management skills. This is because the legal profession is seeing a move towards horizontally integrated firms. And so now taking all of this, I wanna start to turn to the standard deal workflow and its risks. Lawyers generally have a workflow which may deviate in some respects from matter to matter. And as I had mentioned before at the outset of this program today, little time is really spent in putting that workflow into words. And I was also guilty of this. And perhaps that's because the practice is fast-paced and most of our time is spent in the weeds. But today I'm gonna challenge you to take that 30,000 foot view of your matter life cycle. And in doing so, you will better be able to find the areas where technology can better support some of the tasks required to service your client. Given what we know about the impending rise of legal tech, let's shift our focus to problems many lawyers face today that could be addressed by technology. Let's first consider the manual workflow that law firms use today to manage the deal closing process. We'll start with identifying the participants. The steps required include; create a working group list of parties and circulate for verification. Receive changes and update and finalize the list and then resend to all the parties. Now we'll review due diligence. And I've realized that this will deviate depending on which side of the deal your client is on. But in general, the team will first create and send due diligence list, update and finalize the diligence list, resend to all parties. A data room provider is selected, set up and documents loaded. Then you will identify your review team and assign documents for review. And then you will commence review of data room folders. And I will discuss greater detail later about what actually is reviewed, but the review itself generally entails scanning the entire document to identify the provisions most important to your client and the deal. Then the team manually drafts a diligence memo in Word or Excel and shares that with the client. And then an entire process is repeated for each supplemental diligence request. Now let's turn to the closing process. With the traditional deal closing workflow, there are many steps that consume a lot of low value administrative time which is difficult to fill for. This process also requires additional systems and steps such as saving or pulling documents from the DMS, circulating documents via emails, searching emails for the latest version of a document, and the phone calls and meetings required to keep everyone up-to-date on the status of the deals progress. Let's move on to the deals checklist. A deal checklist outlines all of the deliverables that are required to close a deal. Typically, the checklist is created in Word and/or Excel. And the problem with this is that as the transaction progresses, a checklist will constantly need to be updated and recirculated to all parties. And then this is gonna lead to repeated searches through emails to make sure that you have the most up-to-date copy, and too much time spent preparing for status calls. And unfortunately that time can be written off. Generally the steps to create and maintain the closing checklist are as follows. Select checklist template and customize. If necessary, create multiple versions of the checklist. Example, one for each jurisdiction or one that contains confidential information, one that does not. Then sending that to all parties generally via email for review, and incorporating the revisions and then recirculating until finalized. Then some firms will create custom folder structures in their DMS. The checklist will identify the status, notes and responsible party for each item, and will continuously need to be updated and recirculated to all parties. And sometimes there will be status calls with the parties or the client to review how the deal is progressing against the closing deadline. Then we think about document collaboration negotiation, which requires multiple emails, red lines and little peace of mind that you're working on the most recent version. So you conduct multiple searches through email and DMS. These processes bleed together, and throughout client lack transparency into the deal status and require time intensive status communications. So for example, a workflow for document collaboration can be like this. Documents are drafted. I will review the drafting process in more detail momentarily, but let's just focus on the steps required to collaborate with counterparties and the client because it is such an integral part of the work that lawyers do. Drafts are sent to all parties for review and revisions are received and saved to the DMS. Red lighting comparisons are run against the prior or prior versions. Firm discusses the changes with the client. Firm sends rejected or accepted red lines to the parties, and the parties in turn send back their proposed changes until they have an agreed upon form. Document is marked as final and then the checklist is updated to reflect the status. Now let's just drill down on some of the drafting process. Drafting document is the first step of the document collaboration negotiation process, but it also has its own substeps. The standard process for drafting documents can look like, one, paying staking search through your DMS to identify the best precedent document, unwind prior client information, a pen language for the current engagement, save as a new version, update the formatting style, review and proofing. Now let's turn to the signature management process. Many firms are still using manual tedious methods for managing the signature process and deals. Most deals require signers to execute multiple documents, which must contain the same information about each signer. Many lawyers use word to manually create and add signature blocks to documents. This is particularly time consuming for large transactions with many signers, as it means copying, pasting, editing each signature block individually across all transaction documents. Things are especially complicated when there are last minute changes, as each change would need to be manually incorporated into each and every document. Then signature packets are created. Creating signature packs is a typically laborious process that involves using a PDF editor to separate individual signature pages and create a single PDF document with all of the signature pages relating to each signer. Sometimes this is then sent to signers alongside the documents to which they relate for review. If they are sent for e-signature, such as through DocuSign or OneSpan, each of line that the signer must sign and the packet will need to be manually tagged. After they are sent each signature page must be tracked to ensure every page is received. Once a packet is returned, the pages must be manually matched back to the host document again using a PDF editor to create a final executed copy. This is a long winded task with a high risk of error. Lastly, closing books need to be created, sometimes more than one each containing different documents. This requires collating the documents, creating a table of contents, and then inserting the necessary hyperlinks and bookmarks to make it easy for the client to navigate. This on average can take six to 10 hours, and it's not uncommon for closing books to be provided after the final bill, and therefore none of that time is recoverable. I had a partner friend once confide in me that he did not even provide a closing book unless and until the client asked three times because it entailed so much non-billable time. So I just went through countless steps required to bring a deal to closing, most of which are purely administrative. This is not the substantive type of work that you imagined you would be doing when you went to law school. It's not the type of work that will give you greater insight into the deal. And it's not the kind of work that will make you a better lawyer. And to add insult to injury, many of these steps leave legal teams susceptible to embarrassing errors that can lead to costly delays, omissions and unhappy clients. So now let's turn to the risks associated with this manual workflow. I really appreciate the quote from Albert Einstein. If I had an hour to solve a problem, I'd spend 55 minutes thinking about the problem and five minutes thinking about solutions. The thing about technology is no one is going to adopt technology for technology's sake. A cornerstone of change management is that the change must be perceived as beneficial. For technology to be beneficial to you, it must solve a problem. Before diving into the risks attendant to the traditional standard workflow, I wanted to first provide some context and identify current trends in deal activity that are amplifying the risks I will discuss. My hope is to illustrate that if there is ever a time to implementing emerging technology to support the deal workflow, it's now. Spoiler alert, 2021 was a historic year for M and A. Let's review the numbers. In 2021, the number of announced deals exceeded 62,000 globally, and that's up an unprecedented 24% from 2020. Publicly disclosed deal values reached record highs of $5.1 trillion. And this includes 130 mega deals with a deal value greater than $5 billion, which is a staggering 57% higher than in 2020, and smashing the previous 2007 record of 4.2 trillion. The Middle East, Europe and Africa showed the greatest growth in deal volumes compared to the prior year with an increase of 34%, followed by the Americas with 22%, and Asia Pacific with 17%. Although the volume of deals in 2021 was approximately the same across the three regions. Deal value was more heavily weighted towards the Americas with over 50% of deal values and approximately 60% of mega deals. What we're seeing in 2022 is that global deal activity has slown a bit, albeit from these historic highs. And the activity is still higher than pre-pandemic. But increasing deal volume creates and amplifies risks. Risk increases with higher deal volumes because timelines are being compressed. There's a need for speed to execution due to market uncertainty, and valuations are more complex and uncertain. Gone are the days where an analysis of the financial and legal documentation is rigorous enough. Now the scope has expanded to include areas such as human resources, data privacy, cybersecurity, intellectual property, tax considerations, COVID compliance and proof of environmental, social and governance policies. We're hearing a lot about BSG. This results in more risk exposure and the need to identify these risks and due diligence. Also, considering we're in the midst of the great resignation, you may not even have the head count, and what head count you have is already feeling burnout. According to Compliance Week's Inside the Mind of the CCO survey, 25% of compliance and risk professionals said that lack of support and resources is the part of their job that keeps them awake at night. And we need to also consider the risk attendant to the closing process, which comprises heavily of low value administrative tasks. Where the risk of human errors high, it can be very costly. And so that's where the adoption of time saving technologies and alternative data will help in 2022. So let's start by reviewing the risks attendant to the standard due diligence process. It's all too common that diligence review is understaffed. A traditional approach to a large due diligence project might involve reviewing somewhere between 20,000 and 200,000 documents, which could take at the upper end more than 50 timekeepers approximately one year to review, and would hire a very large budget. But you don't have a year to conduct review or even a fraction of that. And as we previously noted, the timelines for review are shrinking. Also you may not even have the head count and what head count you have is feeling burnt out and your client may have budget constraints. Even with a super heavy lift, a 200,000 contract review would only reveal what was in about 20% of the documents. But what about the the other 80%? Should we just decide to look at samples and hope for the best? With traditional due diligence, you also run the risk of overlooking or missing contract terms; whether those important terms were contained in a low value contract that did not pass materiality muster, or perhaps worse was contained in a material contract but overlooked as the result of human error. And no doubt everyone here is a great legal mind. But human error is a risk we all face, especially on the heels of late nights and lengthy contract review. When it comes to due diligence, resources are often limited. So lawyers are focusing on where they deem to be high impact risks in reviewing the largest contracts where they think there might be the most important commercial terms. They're reviewing what they deem to be material. But the result of this traditional approach is that lawyers are only reviewing a percentage of the contracts and documents. They're only reviewing the contracts and documents that fit that predetermined materiality criteria. But even relatively small and insignificant contracts which might not be reviewed under traditional materiality standards, can include terms such as non-competes, most favorite nation clauses, exclusivity, or even affiliate provisions that can potentially pose significant risks to a transaction or to the post-deal success of the parties. Failing to identify obligations in contracts could sometimes pose legal problems down the road for the buyer. Courts have tended to enforce terms of contracts entered into by acquired companies against their new parent companies, in cases where those risks could have been uncovered in the diligence phase. For example, in August of 1999, Watson filed suit against Roan Polan RO, a predecessor to Eventists. The lawsuit alleged breach of a manufacturing and supply agreement in a noncompete clause contained in a 1997 license agreement, granting certain rights to hypertension drug to Watson. Eventists ultimately settled the litigation for $60 million. Here's another example of how easy it is to overlook an important contract term that is near and dear to me. In 2013, Kira, a legal tech vendor that we will talk about in greater detail later signed a customer contract. And in that customer contract, Kira agreed to a non-compete. Kira agreed not to be an alternative legal service provider. Now in 2013, that didn't matter too much, but in 2021 when Litera acquired Kira, that potentially mattered more. Now a good thing Kira had a good sense of what's in its contracts, but here is the really important point. That non-compete was in a $35,000 contract. A contract for Kira's purposes was not deemed material. That non-compete was potentially a low frequency but high impact provision. Now it's not just non-compete, we've been hearing similar stories anecdotally about other provisions that can potentially pose significant risks to a transaction or to the post-deal success of the parties. Now let's consider some common drafting mistakes. We have unpaired quotation marks, spacing variations, inconsistent numbering, undefined defined terms not used in the document, incomplete scrubbing of PII, citation errors or incorrect cross references. Let's think about the challenges attending the document drafting process. Legal documents must be carefully drafted to protect clients' interests, clearly define their obligations and defend their positions. With legal documents, the stakes are always high. That makes the challenge of drafting particularly daunting. Interestingly, one of the first areas to be transformed by technology, document drafting is still one of the least advanced. After the initial leap toward Word processing, drafting processes in many legal practices have stagnated. Many law offices seem to believe that standard Word processing technologies is sufficient to their document needs. But is it? Legal documents are longer, more complex, and frankly more important than other documents. From court filings, to memoranda, to contracts and correspondence, documents are the backbone of legal practice. And that's why lawyers continue to spend a substantial portion of their time creating, polishing and reviewing their documents. An incorrect client name, date, or dollar value can idly damage a contractual relationship. A mistake in cross-referencing or citation can cause a court to disregard a legal filing. Even when these errors don't have catastrophic consequences, they are tremendously embarrassing. Legal professionals need a way to ensure that their documents are absolutely perfect. Lists must be correctly numbered, cross-referenced, and citations must be flawless. Court filing requirements must be completely satisfied. And even documents that leave the office should have consistent look and style that inspires trust and respect. And this doesn't even address getting started. The blank page can be extremely daunting. Now we all know that we don't usually start with the blank page. Historically, lawyers created efficiency through the use of precedent documents to avoid reinventing the wheel. However, reusing documents poses to distinct challenges. First, lawyers must be able to find the best, most current standard documents to begin with. Second, reusing content creates the risk of introducing incorrect details from those exemplars. And this resonates with me. Time and time again, one particular partner I worked with noted typos in my work product, and repeatedly suggested that I print my work and review it on printed paper. Given the number of years I had been practicing at the time, this was definitely not the type of feedback that I wanted to receive. And every time he noticed the typo, I wanted to crawl under a rock. Of course, I listened to that partner. I printed my work product and paid mistakenly reviewed the hard copy. And then after typing in my written edits into Word, I had my legal admin perform a second level review. And even with this process, typos would slip through. Many times, these typos were unique to legal documents. Incorrect paragraph, references and contracts, mis-citing legal were the most cringe worthy, not properly scrubbing the details that were not applicable to the case, like the wrong client name, address, or valuation. So here's an example of not properly scrubbing a client facing document. And I realize that this doesn't really pertain to contracting, but I think it's a really important illustration. So at the end of the 2013 season, Steph Curry's contract with Nike was up for renewal. Nike invited Steph and his father to a meeting where Nike would pitch Steph to renew his contract with them. According to Steph's father, the pitch kicked off with one Nike executive accidentally mispronouncing his name, and it got worse from there. When going through their pitch deck, a slide featuring Kevin Duran's name came up, left on by accident, presumably from repurposed materials. Curry's father said, I stopped paying attention after that. This mistake was the final straw that made Curry sign with Under Armor. And sales of his basketball shoe sold at Under Armor went up 350% in 2016, making them higher than sales of any Nike shoe except Jordan's. Business Insider quoted a note from analyst who estimated Curry's potential long-term worth to Under Armour at more than $14 billion. And this is an infamous example of a drafting and review at risk. And as we'll show later, if Nike had used technology and automation to double check their slides before presenting, the story may have ended differently. And so now let's look at some of the risks attendant with the standard closing workflow that I described before. The standard workflow poses the greatest risk to attorney reputation when things go wrong. Here's a few examples. First, with updating the checklist, there's the risk of inconsistencies between internal copies of the checklist with confidential information and circulation copies omitting this information. And then we think about status updates. Clients lack transparency into the deal status and require time intensive status communications. Also with different parties seeing documents that were often in different email chains, it's really easy to lose track of the latest version. For managing signatures, there's a high risk of error in omitting signature pages to key documents. And then post-closing, mixing documents will lead to expensive delays, client frustrations, and could negatively impact the firm's reputation. And it may come as no surprise that lawyers working on major deals have a big target on their backs when the information related to those deals is extremely valuable. Whereas insider trading by rogue employees was a primary concern in years past, firms now also have to worry about hacking. There's a news article from 2016 where three individuals were accused of hacking two law firms and stealing emails of partners who worked on mergers. The three then bought shares of the target companies and selling them after the deals were announced. So the wider the spread the communication, the greater the email distribution, the more susceptible to hacking. And cybersecurity and cyber risk issues may figure significantly into deal valuation before signing, as they may present potentially serious and material operational and financial risk during the post-transaction integration. And so now I wanna start to think about applying technology to improve the deal workflow. I'm about to share information about solutions on the market today that address many of the deal workflow risks we just covered. I will provide as examples solutions that my previous employer sells. However, this is not a sales pitch. I don't know your workflow, your current tech stack and the problems that you face in your practice. With that in mind, I can't possibly know if these solutions are right for you. The purpose of me sharing these solutions and the problems that they solve is to get you thinking about the challenges that you face, whether they're commonplace or not, and to begin to consider whether there is a solution out there to help you. For me, I at times had a hard time identifying problems in my practice, mostly because I felt that some of the inefficiencies or gaps in my work were just a part of doing business. On occasion, it took me considering various solutions to determine whether the problems that they solve are problems that I personally faced. One solution to these identified risks is incorporating artificial intelligence into your due diligence process. Before going into more detail, I think it's very important to clarify one big misconception about AI. AI is not meant to replace the work of humans. The truth is that machine plus human is better than machine or human alone. I appreciate this observation from Jenny Rudy, the former CEO of IBM. Some people call this artificial intelligence, but the reality is that technology will enhance us. So instead of artificial intelligence, I think we'll augment our intelligence. Too many times we've been met with the concern that AI devalues the work of humans. But I'm here to challenge that misconception. As I'll explain in more detail shortly, AI is a resource that makes the humans, lawyers, better at their jobs, by manipulating risks of overlooking key contract terms and creating efficiencies that never existed before. So for example, there's Kira, which is an AI empowered contract review tool. So what does Kira do? Kira automatically highlights and extracts contract provisions that are important to you and helps you organize your data for analysis. Kira was trained by an in-house team of legal knowledge engineers that Litera refers to as LKE, to identify and extract over 1400 contract provisions, what Kira refers to at smart fields; which include all of the provisions commonly reviewed during the course of due diligence. Now I wanna take a minute just to distinguish a smart field from a simple keyword search. For example, say you wanted to review a contract's change of control provision. That provision may contain both the words change and control or just the word control or just the word change, and in some cases it may contain neither. And in that case it would not be picked up by a keyword search. Regardless if the change of control provision contains the word change or control, Kira would be able to identify and extract that because it was taught to identify and extract that provision by the LKE team using example contracts pulled from Edgar. Kira's standards require virtually every out of the box smart field to achieve a minimum 90% recall; meaning that the software will find 90% or more of that provision clause or data point that you're looking for. If the engagement requires the review of additional or unusual information, firms can use the Kira quick study to train Kira to identify their desired clause. However, many of the firms that use Kira find that they don't need to train it. The key benefit of a tool like Kira includes risk mitigation by reducing the likelihood of errors that result from press timelines. We like to think of Kira as another set of eyes on a document. Kira is also a project management tool. As noted in de Deloitte survey referenced at the outside of our presentation today, there's a consensus that due diligence will continue to be performed in remote or a hybrid work environment. In addition to facilitating substance review of diligence documents, Kira allows teams to assign documents for review and track the progress of the team in one centralized location. This is a particular feature I wish I had the benefit of as a senior associate. I just spent way too much time generally unbuild or written off tracking the work of my juniors. Third, Kira also streamlines the process of flagging documents for high level review, and highlighting key issues that are material to the transaction. With Kira, it will highlight the provisions, the contract provisions that you wanted to find in a document viewer. Generally, the workflow for the document viewer with Kira is as follows. You're gonna open that file, and Kira's gonna have highlighted and extracted the contractual provisions and data points; those "smart fields" that you want it to locate. So within that document viewer, you can find and summarize the fields in any of the following ways. You can add notes to the field results, which is a best practice. You can edit, extract a text, you can flag a field for additional review. You can delete a result that's over-inclusive. In fact, Kira does lean towards over-inclusivity rather than under-inclusivity. And then you could also manually tag text results because the nuance was not identified. And then you can mark the document as review and move on to the next document. Kira also has data visualization tools that enable users to instantly track progress and view the details of aggregated data. The dashboard feature allows you to create a customizable dashboard to get a bird's eye view of your project to help communicate risks both within your project team and to your clients. This allows you to share real time, up-to-date, high level information with clients, provide visibility in understanding the state of the project at the beginning and throughout, and view custom bespoke deal dependent content. For project managers the dashboard also allows you to customize the display of data sets depending on the type of project and context to match partner or client needs, dissect and cross-reference the data in different ways to drill down for deeper analysis. And three, export dashboard analysis for use in presentations. Also tools like Kira cut down on the Word processing steps you would need in order to produce a report. Instead of copying and pasting hundreds of blocks of tasks, you can simply select the documents you want to export and click export button. Users can also select which extract the provisions are contained in the export and select from a variety of formats, including Word and Excel. Now let's turn to tech-assisted drafting. Lawyers are no longer limited to the capabilities of Microsoft Word. The legal tech industry is replete with tools that support the drafting process, which comprises the lion's share of the work performed by attorneys. Now, deal teams could apply technology to each part of the drafting like cycle, from document creation, identifying precedent, provisions, revision and collaboration. So for example, Litera create first drafts with a template and document assembly solution. You can find and use your best clauses faster and with a clause library. And you can also style any document from any source more consistently and quickly. Check is another Litera tool that allows lawyers to repair and stabilize documents faster. You can proofread more effectively by reviewing your entire document for potential issues in one consolidated dashboard. Finally, there are collaboration tools that allow lawyers to instantly compare complex documents, and protect against metadata exposure over email and share files. For example, Litera Check uses natural language processing to automatically surface and flag issues in real time, to help ensure the validity, accuracy, consistency, and clarity of all document terms at each stage of the document creation process. Check allows legal teams to assess their documents legal health with a single click. We've referred to this as Grammarly for legal; instantly seeing items that need attention. Users can then sort issues by priority and category so that they can fix the most urgent problems first, such as numbering and formatting errors caused by copying and pasting, reusing previous documents, or errors that arise when working with multiple collaborators. Check also has integrations with Lexis Advance case, texts and fast case to ensure that all your citations, whether in full or short form are correct in court approved formats and up-to-date. Lastly, an emerging discipline in legal tech is referred to as transaction management. The aim of which is to provide a collaborative workspace and cut down the number of administrative tasks required to close a deal. Transaction management is something near and dear to me. When I joined Litera as a transaction advisor back in 2020, I helped deal teams incorporate it's transaction management solution into their workflows. One feature of transact their solution and other transaction management solutions available on the market is a collaborative workspace that limits the amount of time spent, bouncing between your email, your checklists, your DMS, call notes, and other modalities of communication. These interactive checklists provide a realtime view of all documents, versions and deliverables throughout each stage of the deal process, and allows internal and external parties to collaborate directly within the platform. You can also append all versions of each item to this interactive checklist for ease of review, and to ensure that you are working in the most current version. Some transaction management tools also automate the low value administrative tasks that are prone to human error. The technology allows signature pages and packs to be created automatically, sent directly from the application, tracked and then matched their document automatically upon return, and collated with ease. And this is gonna reduce the risk of signature pages from key documents missing in packets or pages being matched to the wrong document. Lastly, there are several solutions on the market to facilitate the creation of closing books; from building the table of contents, collating the final documents, and adding the necessary hyperlinks and bookmarks. Taking a process that I discussed can take about six to 10 non-billable hours and reducing that to just a matter of minutes. So now we're nearing the conclusion of our program. Here are some key takeaways. The pace of technological advancements is accelerating. Disruption has impacted nearly every industry and the legal services industry will be adaptively changed by technology. Considering growing investment in legal technology, coupled with intervention friendly reforms, to the legal practice rule that are placing new entrants in the legal marketplace, and giving incumbent firms capital to build their tech stack. The changes in legal may be just over the horizon. For lawyers to stay afloat and comply with their duties under the rules of professional responsibility, lawyers are required to stay abreast of technological advancements. In thinking about how technology can support and improve the deal workflow, first, give consideration to the problems you face and then look to the solutions. We are seeing three key innovations that support the deal workflow. AI for due diligence, drafting automation, and transaction management. But lastly, I just wanted to leave you with a little food for thought. In his book, "Crossing the Chasm," Jeffrey Moore elaborates the marketing techniques to successfully target mainstream consumers. "Crossing the Chasm" is a concept for visualizing the adoption of a new technology over time. Starting with a small handful of innovators that tech enthusiasts and early adopters thought of as the visionaries, which make up about 16% of the population, and collectively referred to as the early market, moving through the massive mid-market and eventually into the hands of even the most change resistant consumers. The chasm is the gap between the early adopter and the early majority groups. And this gap represents the chasm that the technology has to cross. It signifies the credibility gap that arises from using the innovators and early adopters as a reference base for the remainder of the mainstream market. We can't really think about innovation legal, especially tools that disrupt the workflow of legal teams without consideration for the change management that will be involved. The tech untouch adds no value. And while I can talk about this subject for a whole other hour, I'll give you the abridged version of my advice. There's a misconception that people are resistant to change. People generally welcome change that they perceive as a benefit. As Moore's Curve shows, in assessing whether a change is beneficial, many need a reference point. Therefore, I suggest that when rolling out a new tech tool, the first step is to identify those innovators and early adopters at your organization. Take this baby step before setting out to implement widespread change, and you will find greater success in crossing the chasm and future-proofing your practice. Thank you for your time today.