Last week’s Reveal acquisition of Logikcull and IPRO seems to have reignited the question: is consolidation of eDiscovery vendors finally happening?
That certainly seems to be the premise of this article in Legaltech® News (How Long Is Your Legal Tech Vendor Going to Be Around?, written by Troy Nørgaard and available here). The author says “many of today’s legal tech vendors are startups who are still trying to find their way forward. As a result, there is a risk that some of these vendors may only be around for a short time, or they are subsumed into another organisation—outcomes which will impact their users more than most.”
He also gives five reasons why the legal tech market will look very different by this time next year:
- Consolidation, mergers, and acquisitions, where he notes that “the battle for market share is only going to get fiercer. As a result, a period of market consolidation is inevitable.”
- High interest rates impacting funding runway, where he notes that “As VC funding levels remain stagnant and high interest rates bite, many are now struggling to top up that funding. Several will run out of working capital over the next year or so.”
- Investor patience is running out, where he states that “If a startup does not meet their growth targets, VCs are quick to pull the plug. They are not going to wait around for years for those startups to show results. If a legal tech startup does not start generating revenue soon, it is likely to be taken out back and shot.”
- Evolving market needs, where he states that “as mid-market enterprise businesses start to curtail their spending and evolve past the experimentation stage; they are consolidating their tech stacks. This will only intensify the battle for market share.”
- The impact of layoffs, where he says that “CEOs are being forced to show that they are moving their companies forward by conserving working capital, monitoring the impact on cash, securing access to credit, and keeping a close eye on talent and culture.”
So, is consolidation of eDiscovery vendors finally happening? Personally, I don’t think so. According to Rob Robinson’s ComplexDiscovery site, we’ve seen 22 eDiscovery merger, acquisition, and investment (M&A+I) events so far this year. While that’s already more than last year’s 20 total events for the year, it’s considerably behind the pace of 54 events we saw in 2021 (which was a record).
Even after that record year in 2021, our industry was far from consolidated then and that’s still the case today. There are still numerous eDiscovery software and service providers out there. A couple of years ago, I was asked to assess the eDiscovery software platform competitive landscape for a client. I counted no less than 52 review solutions being offered by providers (not counting legacy eDiscovery solutions).
While eight to ten of those providers have been acquired since then, there have also been some new entries into the market during that time to replace them. There may be a few leaders at the top of the market, but there are still several other software platform providers that have continued to maintain enough of a client base to continue to at least exist, if not thrive. I haven’t checked every one of them to confirm they’re still in existence, but I know many of them still are.
So, I don’t think consolidation of eDiscovery vendors is happening, nor do I think it will anytime soon. The generative AI boom alone is going to replenish the list with new startups that will compete.
So, what do you think? Do you think consolidation of eDiscovery vendors is finally happening? 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.