Thomson Reuters recently announced that it was buying legal process outsourcing provider Pangea3 for a price that has been estimated at between $35 and $40 million. At the same time, Thomson put up for sale BAR-BRI, the bar exam training and preparation company it purchased several years ago.  And several days earlier Indo-American LPO UnitedLex bought LawScribe, which also operates in India.

According to Law21, "It’s difficult to overstate just how important this [Thomson] purchase is — it will transform at least two legal industries and quite possibly the whole marketplace."

Here’s the reasoning:

Simple publishing as a major product category has a limited future, so companies like Thomson and LexisNexis are branching out into complementary areas, with uneven results–the LPO that Lexis set up in Chennai years ago essentially failed.  

Thomson’s acquisition of a large, robust LPO will likely give Thomson an edge over Lexis and the like and also make it hard for other outsourcing companies to compete against Pangea3, both outside the US and here at home–Pangea3 has already made it clear it intends to use its new backing to set up a significant practice within the United States.  So we may well see a movement towards consolidation among the young LPO competitors and a fine tuning of the business model and pricing.

While a healthy, savvy LPO offers both clients and law firms an additional resource, law firms are now in the position of having the company that once provided them with practice tools competing with them where firms have often made a good profit–off of the work of junior lawyers. 

While Thomson doesn’t provide legal services, its size (55,000 employees in 100 countries), resources and stable of legal-oriented companies make it well poised “to help the legal system perform better, every day, worldwide,” as its mission states, right up to that line.  And well situated to go beyond, if there is a regulatory opportunity.

But not everyone concludes that this is a monumental development.  Aileen Leventon of QLex Consulting thinks the acquisition is simply a continuation of Thomson’s corporate strategy to provide tools that improve the efficiency of the legal profession in a constantly evolving marketplace.

"What Thomson’s recent acquisition of Serengeti and now Pangea reflects is the power of the buyer’s market in driving down costs of legal services. The former is a matter management system that produces data and metrics to guide the purchase and management of  legal services. The latter is a cost effective means of procuring services that are capable of being standardized – basically transaction processing, rather than services that require judgment and experience." 

While potentially useful in law practice, neither capability sounds like a direct threat to the trusted advisor role that many lawyers aspire to.

Of course, the question of how young partner-track attorneys are going to be trained in a world of outsourcing becomes more insistent when a colossus like a Thomson-backed Pangea3 enters the US market, but it is also one that has already been brewing for some time now.

What may be the most striking aspect of this acquisition of Pangea3 is what it will do to Thomson’s legal consulting business. Hildebrandt Baker Robbins is a combination of two consulting groups, one historically bespoke and the other more mass-oriented.

Now Hildebrandt Baker Robbins will be in the position of advising law firms confronted with competition from LPOs that may well include a Thomson company.  Will Hildebrandt be seen as a feeder of business to Pangea3? Will it be able to help clients find the weakness in LPOs’ approach/product and profit from outcompeting them or alternatively help firms find the best, not necessarily related, LPO to partner with? Or is the conflict too obvious and too deep? 
The news from the street is that Hildebrandt is already in the process of being dismantled, so Thomson may have well understood from the outset which basket it was putting its eggs in. 
With Altman Weil also declining and the accounting firms no longer big players in legal consulting, fewer and fewer sources of sophisticated, organizational advice for this industry remain at a time when massive change looms.
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