The first quarter of 2023 saw good news for eDiscovery investment activities. But another report showed overall legal investments dropped nearly 50%.

First, the good news for eDiscovery investment. According to Rob Robinson’s excellent ComplexDiscovery site, we had 10 eDiscovery mergers & acquisitions, and investments (M&A+I) transactions in the first quarter of 2023. These 10 transactions represent nearly half of the 21 transactions that occurred in all of 2022! That’s some good news for eDiscovery investment!

Rob’s post on eDiscovery Mergers, Acquisitions, and Investments in Q1 2023 showed 3 M&A+I transactions in January, 2 M&A+I transactions in February and a whopping 5 M&A+I transactions in March. Those transactions included: Exterro’s acquisition of Zapproved, Reveal’s acquisition of LIGL and Teris, Elijah, Meta-e, and Modus combined to create new company Repario.

ComplexDiscovery has captured at least 540 M&A+I events between November 2001 and March 2023 – and every last one of them is listed in the bottom of Rob’s post!

To check out Rob’s post, click here.

On the flip side, Steven Lerner reports in Law360 (subscription required) that funding for legal technology companies took another hit in the first quarter of 2023, raising concerns about industry growth amid economic uncertainty. According to an analysis of available data by Law360 Pulse, the number of first-quarter investments plummeted from 106 in 2022 to 55 in 2023. That’s about half last year’s Q1 investments.

Investments without including mergers and acquisitions totaled $345.9 million in the first quarter of 2023, down from $890.4 million in the same period last year – a 61% drop.

Also, according to an analysis by Crunchbase News, global venture capital funding fell 53% in the first quarter from $162 billion to $76 billion.

The drop-off comes amid a slowdown in overall global venture capital funding due in part to a troubling economic climate.

Steven also reports that fears of a potential recession resulted in at least five legal technology companies confirming layoffs during the quarter. Based on others that I’ve heard about, I suspect that number is considerably higher.

From an overall legal tech standpoint, the first quarter brought 46 mergers and acquisitions, the same as in 2022. While Steven notes that “consolidation remains a healthy alternative while funding for legal tech dries up”, I provided my own observations (at least about eDiscovery) in the article, where I said: “Many people always seem to think that the e-discovery market is consolidating, but we seem to get as close to as many new providers entering the market as the companies we lose through consolidation”.

To check out Steven’s article, click here.

So, what do you think? Are you encouraged or discouraged by the above reports? Do you think the eDiscovery market is consolidating? Please share any comments you might have or if you’d like to know more about a particular topic.

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by my employer, my partners or my clients. eDiscovery Today is made available solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscovery Today should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.