It has happened again; once more, v-Lex has changed hands, this time from Oakley Capital to the Canadian software company, Clio (Themis Solutions Inc.), for around US$1bn. Clio/Themis sits within the portfolio of New Enterprise Associates (NEA) venture capital firm, which previously shared in the funding of Ravel Law. Ravel, in 2017, was sold to RELX, which might indicate the future directional path of Clio/v-Lex. Harvey AI had been linked to rumours that it considered acquiring the much more established competitor, v-Lex, the alleged purpose being for the former to exploit the latter, to assist growth. That notion must be firmly off the table, as dramatic events have unfolded. The price paid by Clio is huge and probably disproportionately high, compared to v-Lex’s true value, set against Thomson Reuters market capital of $125bn and RELX’s of $100bn, or thereabouts. The two market leaders are probably more stirred than shaken by the news, but, more than likely, are anxious to retain and gain as much business as they can, perhaps using bundling and price incentives. It might be an opportune time for customers to exploit this.
Of the deal, Outsell’s Hugh Logue, describing AI without content as “hollow”, comments that it “proves [that] AI is empty without exclusive content, growth now sits in the underserved long tail, and point solutions risk fading if they lack specialist data and AI depth that clients can’t easily replicate with today’s low-code tools”. He sees the Clio/v-Lex combination appealing to small and mid-sized law firms, though, I would imagine, primarily serving N. American rules and traditions of legal practice.
The transaction has been applauded widely for its potential to enhance Clio’s practice management platform with the integration of v-Lex’s legal research capabilities and access to such v-Lex content as it maintains, either proprietary or under license, for such time as such exclusive or non-exclusive licences remain in place. There are, at the same time, sceptics who will be pleasantly surprised if it all works out.
I would imagine that the worlds of venture capitalism, private equity, hedge fund management and gambling (are they all the same?) are confusing, or regarded as dark arts, by many others, as they are to me. Still, having regard to the changing world of law publishing, legal information and electronic legal research tools, they are very much in evidence and must, therefore, be extremely important. To semi-outsiders like me, it is always intriguing how recent start-ups and unprofitable businesses can acquire such high valuations derived from what appears to be very little. But then, what is puzzling to one person is everyday stuff to another, so I am not too troubled by my own relative ignorance, in this particular case.
Having recently but erroneously opined that Lexis Nexis and their corporate peers were too rich and well-established to descend to the depths of having to collaborate with market minnows, and that California-based Harvey AI was just another financially-backed, and highly valued, young hopeful, I was taken aback at the news that the two have entered into a strategic alliance to integrate AI technology and legal content and develop advanced workflows. The apparent intention is to offer primary law content and established case citations within the Harvey platform and jointly develop advanced legal workflows. I would assume that secondary law content is, wisely, not included. As Outsell’s Tatiana Khayrullina writes in relation to standards publishing, which might be considered analogous to primary law, “Standards publishers face growing uncertainty as legal shifts and tech disruption challenge traditional subscription models. Monetization is under pressure, prompting a shift toward value-added products that offer integration, usability, and digital delivery to meet evolving user needs”. The plan is for the alliance to combine LexisNexis AI technology and content with what users expect in Harvey, for the benefit of Harvey customers.
Regarding the deal, Hugh Logue describes it as Lexis Nexis having armed Harvey, as he views artificial intelligence without proprietary data as obsolete. It is difficult to disagree with that. He writes that the “LexisNexis and Harvey deal removes Harvey’s biggest weakness – the lack of access to proprietary legal content – by baking LexisNexis’s cases and statutes into Harvey’s AI app. The result is a powerful combination of a legacy content giant and a startup innovator that puts competitors on notice”. I am not clear, though, about what is the notification, other than that there are opportunities for acquisitions to be done by the behemoths. I doubt if it greatly affects Thomson Reuters, which dealt with its minor challenger, ROSS Intelligence, using different strategies, while making significant strides in both artificial intelligence and deep research capabilities. I am not certain as to who are the other competitors to which reference is made. For some time, observers had expressed the view that Harvey was going to have to obtain data, particularly caselaw, from outside sources, in order to be able to flourish. If that is the case, Harvey attaching itself to Lexis Nexis looks like a smart move, certainly for the newcomer.
The importance of quality secondary legal content cannot be understated. Legal publisher, Kevin O’Keefe, correctly, in my opinion, stresses that “in the age of AI search, law firms must focus on legal publishing that gets their lawyers sourced and cited—not on chasing clicks and website traffic”. He encourages practising lawyers to be published and cited, in order to thrive.
It is notable that some commentators are almost invariably focused on improving the obvious weaknesses of the recent startups, while forgetting to point out the sheer brilliance of the sophisticated, integrated, tested and trusted products and services, with their constant large and small capability tweaks and enhancements, from the market leaders. Their true, ever redeemable, shortcomings might be in customer care and pricing, but not so much in the fundamentals.
Credible and impressive deals are those which bring quantifiable benefits to both parties, so they must be substantial for Lexis Nexis. One reason might be that it is taking steps to protect and grow its investments. LexisNexis’ parent company, RELX, is a significant investor in Harvey AI, thanks to REV Venture Partners, RELX’s venture capital arm. With Harvey presently included within REV’s portfolio, where, until 2016, sat Intelligize, a provider of content, news collections, regulatory insights and analytics tools for compliance, transactional and financial reporting professionals, which was acquired outright by RELX and now forms part of Lexis Nexis, it must be somewhat likely that Harvey AI is being nurtured for outright acquisition by Lexis Nexis. That would make simple and unremarkable sense of recent events and developments. It was in 1994, that Lexis Nexis itself was purchased by Reed Elsevier, though, by then, LN’s reputation and credentials were historically well-established. Reed Elsevier’s Butterworth’s had already been a licensee of Lexis Nexis.
Another option might be that, at some time, Harvey finds itself owned by Wolters Kluwer, as the two have announced a collaborative set of licensing agreements by which Harvey has access to primary content from Wolters Kluwer’s German and US businesses, and the two will explore other such opportunities. Maybe the time has come to reignite the old question, from 1998, of a RELX and Wolters Kluwer merger, especially with significant changes currently under way at Wolters Kluwer, the significantly smaller of the two. Meanwhile, we might anticipate a content license from Thomson Reuters to Harvey, just to achieve a hat trick.
If anything, even vaguely along those lines, becomes an eventual outcome, the result too might be the predictable one, as happens when a huge and rich but non-innovative one swallows a small, fast and extremely smart entrepreneurial one. One of the two, before too long, will be invisible, which might not be a bad idea, its founders having given the baby the appellation of Harvey, named, it would seem, not after a giant, invisible, imaginary white rabbit, nor a notorious American sex offender, but an unpleasant-sounding character from a television drama series.
With the news about both v-Lex and Harvey, it would not be surprising to hear about other not-dissimilar deals being done over the mid-term, the transactions and arrangements becoming progressively larger in scale and value. The need to combine content with documentation workflow and to gain access to greater and more quality markets remains, for smaller businesses seeking security and wealth and for the large ones to maintain and steadily increase their standing. The market positioning that exists in-between the young entrepreneurs and the two leaders might seem somewhat uncomfortable, perhaps encouraging further reorganisation and/or consolidation. It might be appropriate to launch a speculative “Fantasy Folly”, to imagine where the law publishing, information and solutions activities of Wolters Kluwer (which has agreed to divest its Finance, Risk and Regulatory Reporting unit, from its Financial & Corporate Compliance division, to the Regnology Group), Bloomberg, Karnov, Informa, Bloomsbury and indeed, Clio and others will be (or not) within the next few years. On a distantly related topic, serving to remind that all actions have consequences, perhaps as a result of Canada’s Irwin Law having been acquired by University of Toronto Press, Australia’s Federation Press has entered into an agreement with AI-enabled services company, EBSCO Information Service to distribute Federation Press’ catalogue of legal scholarship through the EBSCO eBooks platform. Irwin Law was the North American agent for the Australian law publisher prior to its own acquisition. Perhaps the new arrangement will highlight the Australian law content, making it too more visible to content-hungry predators. On all such issues, of course, I am obliged and happy to recognise that wholly opposing views are expressed by many other extremely knowledgeable experts. That said, no one can accurately predict the future, including time, scale and financial metrics.
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