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The advent of document digitization and email in the 1990s drove deal attorneys from a paper-driven process toward a digital deal workflow. The earliest software applications for transactional attorneys are now core workflow tools for every law firm. Attorneys regularly use email, Microsoft Word, PDF applications, document management systems and redlining tools.

But fitting complex workflows into generic software applications created brand-new bottlenecks in the deal process—from due diligence review to document drafting to signing and closing—that still exist today. Fortunately for deal attorneys, new tools continue to emerge to address these pain points.

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Diligence

One of the earliest technologies built for deal teams was the virtual data room. Virtual data rooms are online repositories where information can be shared confidentially between select parties in a tightly controlled environment. Virtual data rooms replaced physical rooms where potential buyers would confidentially review a seller's documents in person.

The prominence of virtual data rooms created an opportunity to more efficiently review the documents in these repositories. Diligence automation tools can now help attorneys identify, extract and analyze key contract information in company agreements and related documents. By training machine learning algorithms on common contract provisions, diligence automation tools can improve the document review process by an order of magnitude and are building a foundation for future contract review tools.

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Drafting

Once deals move from the diligence to the drafting phase, software such as document assembly tools can vastly improve the drafting process for common types of agreements. Document assembly software allows attorneys to use templates and past work product to quickly generate new contracts. The first generation of document assembly software required attorneys to code their forms in proprietary formats. Newer document assembly tools provide no-code solutions for converting contracts to templates or even use machine learning technology to automatically identify variables in contracts and stamp out new forms.

If a contract requires substantial custom drafting, the attorney needs to carefully review the contract to ensure coherence throughout the agreement. This process may be aided by contract review tools that can proofread contracts to prevent mistakes with elements such as section references and defined terms. Contract review software has matured into sophisticated tools that can not only help attorneys prevent mistakes but also flag problematic terms and establish conformance with firm playbooks and contract standards.

Lastly, software tools have been developed to help attorneys identify precedents and compare their deal terms to market standards. These market comparison tools allow attorneys to compare their contracts and specific clauses to terms most commonly used in similar deals or specific industries.

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Closing

After documents are drafted and negotiated, they still must be signed. In the early 2000s, countries started to develop electronic signature laws to support more efficient transactions. By the 2010s, corporations and law firms started adopting e-signature tools. These tools not only reduce the time to collect signatures but also create audit trails for a better evidentiary record.

More recently, law firms have been adopting closing management tools to not only collect signatures but to automate the signature packet creation and closing set process. Closing management tools allow attorneys to prepare, track and finalize closing records related to a transaction. By following common attorney workflows for complex transactions, these closing management tools not only reduce write-downs around closings but also make it easier for attorneys to adopt e-signatures as part of their practice.

Finally, there are several tools that make it easier to track post-closing obligations and records from deals. Attorneys can use capitalization table software to store and maintain cap tables and stock ledgers, as well as calculate the effect of liquidation events on company stockholders. In addition, they can use shareholder representative software to ensure that payments, escrow and other post-closing covenants are met after a deal is closed.

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Future Developments

Many transactional technologies a decade ago were tacked on to Microsoft Word, the de facto platform for document drafting. Today, however, most transactional technologies are delivered via modern web applications. This means there is nothing to install on users' computers, fewer dependencies for IT departments to support and continuous updates to the latest and greatest versions of these tools.

Building transactional technology on web standards also has the benefit of enabling various technologies to connect to each other through APIs. This enables law firms to mix and match different tools in a way that best supports how the firm wants to manage its deals.

While early transactional software helped attorneys move from the analog to the digital world, a new set of technologies have transformed transactional workflows, creating new platforms for attorneys to streamline and manage their deals. Legal organizations should look to equip their attorneys with this modern toolchain for transactions.

 

Will Norton is founder and CEO of SimplyAgree, a leading provider of closing management technology. Will previously practiced law as a corporate attorney for an Am Law 100 law firm, where he published numerous articles on electronic signatures and contracting. Will currently serves as Editor of the American Bar Association's Technology in M&A Directory.