Factor, one of the largest and more well known alternate legal service providers (ASLPs), recently announced the launch of something called the Legal Transaction Optimization service. Up to now, Factor has focused its offerings and products to in-house legal departments and law firm clients. But Legal Transaction Optimization is designed to provide law firms tech-enabled transaction management, due diligence, and documentation support to deal teams. In other words, Factor is asking law firms to buy services that would replace work that is being done by support staff and junior associates.

 

Ed Sohn, Factors Head of Solutions, recently told me just that: the idea behind the offering is to free up junior associates to do more of what they are trained to do. (Assuming for the moment that law school actually trained them to do something). According to Sohn, this will free up lawyers all the way up the experience chain to do more strategic, creative type work.

 

In particular, according to Sohn, Factor is targeting the following work:

 

  • Transaction management, including checklist maintenance, signatures, centralized coordination, document routing, and closing set assembly;
  • Due diligence, including the due diligence questionnaire and the review of underlying documents; and
  • Documentation, including ancillary agreements, contracts side documents, consents, assignments, novations, etc.

Much of this work has historically been done by junior associates and support staff.

 

Much of this work has historically been done by junior associates and support staff.

 

Sohn argues that in addition to freeing up lawyers to do more what they should be doing, the program will ultimately enable law firms to be to reduce costs and be more price competitive. Presumably, this will enable firms to win more work and deals. 

 

Factor says its marketing to three groups of law firms. First, firms trying to keep their client base and grow. But who have leverage models that force their rates upward which in turn may make them less competitive. Second, those upstart, midsize firms looking to expand their work. And, finally, boutique firms who hope to do serial transactions and more complicated deals without adding people.

 

Of course, the platform would appear to have the added benefit of reducing the need for younger associates and support staff. According to Sohn, this reciting will enable firms to cut costs without cutting rates. While Sohn didn’t say it, the net result should logically be the same or even increases profits for those firms.

 

Sounds good in theory. But in practice, I’m not sure it will work. Appealing to law firms purely on the theory that this will get them more business in the long term without  client cost pressure won’t likely be enough. And here is the trap many law firms find themselves in. They pay starting associates astronomical sums of money. Yet law schools haven’t done much to train these young associates how to practice law. To do legal tasks. Since they can’t do much in the way of practice, law firms and partners all to often give them work that a paralegal or in some cases an admin could do. Otherwise, the young lawyers would not generate the revenue from billable work needed to even come close to offset their cost to the firm.

 

So, for the service to be successful, clients will have to demand that law firms reduce transaction related costs and/or refuse to pay junior associate rates. Perhaps that is what Factor is hoping to capitalize upon: client demand to minimize law firm costs. But as a today’s 2021 LexisNexis Survey shows, that doesn’t necessarily appear to be happening, at least at the high end of the market.

 

One area where the Legal Transaction Optimization service might get traction quickly is with virtual law firms

 

One area where the Legal Transaction Optimization service might get traction quickly is with virtual law firms. These firms, by and large, don’t have a cadre of young associates doing scut work. Instead, they depend more on more experienced lawyers doing higher level work. But for those clients that want to rely on one provider to do a deal, having this ability to do the lower level work could be attractive. I asked Sohn about this. Sohn says that he’s “seeing significant sharpening of the outside counsel value proposition, which virtual law firms are also aimed at premium advisory from brilliant lawyers. Virtual law firms, in a sense, start from a blank canvas so that they might make excellent fellow travelers in this journey to higher client value and liberated law firm practice.”

 

At the end of the day, though, the new Factor product, like any legal tech that reduces billable hours, will require that clients demand cost reductions that can only be accomplished by law firms reducing billable hours and costs to keep business. Or appeal to those law firms that travel a different road entirely.