E-Discovery: The key to cost-effective corporate due diligence reviews

A prudent and efficient approach to document review starts with utilizing technology, incorporating correct people and knowing how to proceed.

Corporate due diligence is at an exciting crossroads. The current model of high-cost corporate associates reviewing stacks of paper documents is woefully inefficient. According to a search of the ALM legal intelligence database, the number of associates in large firms, including corporate associates, has dwindled and hiring trends do not indicate that the numbers will return to pre-recession levels. This means law firms are often ill-equipped to staff up larger deals when time is of the essence and many documents need to be reviewed in a short window of time. Further, associate hourly billing rates continue to increase, making it difficult for some firms to staff transactions within a client’s budget expectations. However, there is a solution to this challenge. Using the litigation model of tackling large amounts of data by employing a well-qualified team of electronic discovery experts, corporate reviews can be managed in the same way that full-scale litigation reviews are tackled. There are three key factors involved in a prudent and efficient approach to corporate document review assignments: technology, personnel and strategic process.

The first key to an efficient, technology-centric strategy involves the use of a review platform to load agreements and other due diligence documents. The dynamic functionality of currently available legal software is ideally applicable to a due diligence review. Agreements received from the client are scanned into a review platform, such as Relativity or other similar software. Using Optical Character Recognition (OCR), the documents are searchable, which means finding certain key provisions can take a matter of seconds. This capability increases the rate of review and leads to lower client costs overall. A tool called “concept searching” groups similar documents together, using characteristics such as geographic location, assignability or agreement type, which allows for faster decision-making when like documents are reviewed in sequence. Also, information can be copied across similar agreements, cutting down on needless transcription and ensuring uniformity with merely one click of the mouse. Using a coding layout, information can be input, saved and easily exported to a spreadsheet for client review. The documents can be accessed at any time by members of the deal team, and the database survives well past the closing of the deal.

The second crucial component in the success of a due diligence review is utilizing the appropriate personnel. Any corporate diligence review will always include a core team of partners and associates. However, adding experienced e-discovery attorneys and technology analysts to this core team enables a firm to tailor a specific plan using a mix of personnel that can help clients meet budgetary and time parameters. Interconnected by the review software, associates and partners in multiple jurisdictions are able to work with e-discovery attorneys and technology analysts to coordinate reviews quickly, ensuring that all members of the diligence team adhere to a predetermined written review plan to ensure consistency.

Using skilled e-discovery attorneys in due diligence reviews increases efficiencies in coordination with technology due to familiarity and experience with particular review platforms. E-discovery attorneys working on due diligence matters retain an institutional knowledge base that can be used for multiple deals with the same client. These attorneys work in teams, moving from matter to matter - with the ability to ramp up a time-sensitive review in less than a day – possessing experience reviewing multiple forms of agreements. Partners and associates provide accuracy safeguards through quality control spot checks of the attorneys’ work. From the intake assessment to the final output, all parties work together to coordinate a deliverable that adheres to clients’ specifications.

Teamwork and technology work in tandem, but the necessary third component is a strategic process. Firms that establish a process to address corporate due diligence can act swiftly to ramp-up and meet client needs. Due diligence reviews can be staffed with e-discovery attorneys in a matter of hours. Appropriate quality control checks at the partner and senior associate level ensure due diligence is performed accurately. Quality protocols are developed for each type of diligence review – mergers and acquisitions, public offerings, real estate portfolio acquisition, health care, etc. – to ensure standardization among document reviewers. Using the review platform (including specific coding layouts tailor-made for the type of review) and an e-discovery team, a plan is developed to feasibly complete each due diligence assignment in the most budget-efficient manner. The fusion of all three elements enable a firm to meet accelerated timeframes and deliver significant value. A strategic approach is crucial to combine the technology and team components into an organized project when a diligence review contains many moving parts.

From a client perspective, one of the most important factors is the bottom line. This new approach to due diligence review can reduce costs from traditional, paper-style reviews by up to 50 percent using technology, people and process. A variety of pricing options exist for a wide-range of diligence: hourly pricing, per document or per gigabyte. The pricing and process can be customized to fit a client’s specific needs.

The foundation of the technology, teamwork and strategic process enables a firm to accommodate any size budget or matter using a technology-based strategy for non-litigation work. When technology and a team of cost-effective e-discovery attorneys interface to stay within budget and produce a high-quality output, using a calculated, proven strategic approach, it is a win-win for the client. The old way of performing corporate due diligence is out of step with the modern technological trends as the nature of how corporate due diligence and transactional work is evolving. Firms that take advantage of the use of review platform software coupled with strategic process and an experienced team are on the cusp on this evolution.

Contributing Author

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Krist Werling

Krist Werling is a partner in the law firm of McDermott Will & Emery LLP, based in the Firm’s Chicago office.

Additional Contributors: Kari Prochaska

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