Allen & Overy (A&O) and Clifford Chance (CC) have received a lot of attention following the January launch of their two internet services: Newchange and FruitNet, respectively.
Both launches raise questions about future working practices, and not just in the large firms: is a virtual dealroom or case management better; and is case management compatible with a virtual dealroom?
Every partner should visit A&O’s Newchange at www.newchange.
com and read the ‘Question and Answer’ file. You receive a lot of valuable know-how, which can be applied to your practice.
Newchange provides two new services to improve document and project management skills: a new modular approach to drafting; and the virtual dealroom.
A&O is either the main or the joint leading firm in big-ticket banking and debt finance work. As the syndicated loan and bond markets developed during the last 30 years, maintaining a good set of finance templates and being able to draft or amend them in the shortest possible time, has become more difficult – a situation made harder as the number of concurrent deals continues to rise, and the completion period gets ever shorter.
In the early- to mid-1990s, law firms faced pressure to produce more ‘plain English’ legal documentation. A&O responded to this challenge and ensured its leading position in the banking market its finance templates. Others followed, but a new standard had been set.
Newchange raises that standard. As A&O points out in its web literature, the clever thing about the Newchange documents is not the technology, but the drafting.
A firm using the latest ‘off the shelf’ document assembly technology, or developing its own document assembly software, will not receive a valuable return if the legal documents are of ordinary quality.
A firm wishing to utilise technology to its fullest, particularly to transact e-business, needs to put its documentary house in order at the earliest opportunity.
A&O has allegedly been working on this project for nearly two years, and, as it points out, practice areas other than banking are still working on their new documentation. So there is still more work to be done, and maybe time for competing firms to catch up.
Good knowledge management is vital. Nobody can dispute the economic sense of maximising your firm’s knowledge assets. Research on leading corporations has categorically confirmed the importance of having a strong knowledge-sharing culture.
When it comes to documentation, there is no greater contribution to good knowledge management, than for every lawyer to take equal responsibility for sharing good documentation, good drafting and a new approach with others.
What about Newchange’s ‘virtual dealroom’, and its CC equivalent: the ‘transaction war room’?
The virtual dealroom is not rocket science, and not the sole preserve of the few. It is simply a logical extension of the electronic evolution from telex to fax to e-mail to the internet. It is also a recognition that, in large international or domestic transactions, a combination of fax, e-mail and courier delivery of numerous weighty documents is no longer efficient.
The launch of these dealrooms will be followed by other similar ventures. They pose interesting questions – the most obvious is which dealroom will the parties use and are there competing dealrooms?
In acquisition finance transactions, such as MBOs (management buy-outs) and MBIs (management buy-ins), there are debt funders and equity funders. But it is the purchaser who controls the transaction. The venture capitalist providing new equity funding is necessarily much closer to the purchaser than the banks.
So does this mean the lawyers to the purchaser and/or venture capitalist will be able to insist on ‘their dealroom’ being used? Could Newchange not be used in these circumstances, because A&O is acting for the banks and not the venture capitalist? Unlikely, after all that investment, so presumably there could be several dealrooms used in the same transaction – perhaps FruitNet for the venture capitalist and Newchange for the banks.
What about smaller firms? To be able to compete does each firm need its own dealroom? Or might it make more economic sense to co-own or lease on a ‘pay per use’ basis part of one central dealroom?
For example, in the domestic MBO and MBI market, is it a fantasy to suggest that the leading players in each of the main provincial cities will establish their own local community dealrooms?
And what about the other London firms? Will they go down the proprietary or shared route? After all, a corporate transaction is supposed to be a shared venture, so why not share the costs of the virtual transaction community that are needed to execute it? Clients have to pay their costs in the end, so they might expect law firms to achieve available economies of scale.
And what might the accountants be up to? What documents and progress reports are they going to publish in their own dealrooms? As the accountants are invariably involved in initiating a corporate transaction, they might be in a better position than the lawyers to exert project management control on the transaction. At the very least, they are in a position to influence which dealroom will be used.
For many smaller firms, there are other ways of improving working practices. When lawyers and support staff are working on different parts of the same matter, they could improve efficiency by recreating the equivalent of a virtual dealroom within their own organisation, for example by using a password-protected part of the firm’s corporate intranet or working within a true case management system.
Many firms already do just this, although to date case management has generally been confined to ‘low-value high-volume’ areas, such as debt collection and insurance claims, and not international banking transactions.
You could argue that one advantage of case management over the virtual dealroom is that every aspect of the case is held within one system, whereas the dealroom tends to cover only the documents. Presumably, A&O banking lawyers will continue to work with a combination of paper and e-mail, behind Newchange.
There are other unanswered questions. Are case management systems for large commercial non-contentious transactions, such as corporate acquisitions, ever going to be a viable working option? It is probably fair to say that most lawyers, who advise on large corporate transactions, would argue that there have been just too many variables, too many time pressures and too many people involved, to write a set of workable business rules for case management in this area.
Nevertheless, the right answer must be that it is possible, and it can only be a matter of time before true case management systems are used across all practice areas. A&O took up the challenge of innovation in relation to the next generation of their banking documentation, and succeeded by writing a new set of rules to make them work with the new technology.
Full case management in all areas will be another difficult challenge, but for most firms, it will be better to work as much as possible within one integrated and transparent system, and not one that involves dealroom documents only.
Clients ultimately will decide where the line is drawn, but A&O and CC have been quick to put down markers in their particular markets. Everyone will be watching their next moves with keen interest.
Tim Travers is a consultant at e-Legal Logistics.
