It is no surprise that many law firms’ strategic growth plans are focused on Private Equity and Venture Capital organizations. Their spend on average is $35 million on outside counsel for fund- and deal-related work each year.
The added pressure of a downturn in M&A activity and general economic uncertainty in many jurisdictions means that law firms are facing challenges with profitability and productivity in key practice areas.
What can law firms do to compete and thrive in fund formation?
There are multiple ways that firms can support PE and VC clients in fund formation, for example:
- Negotiating the key terms of a transaction
- Drafting the investment documentation
- Managing the transaction
- Conducting legal due diligence
- Foreseeing and resolving issues that may have an adverse impact on future fundraising or the potential exit
Onboarding new business
Onboarding is an important and legally required process in all fund formations, which involves certifying investors and ensuring the source of their capital is legitimate. It can also include drawing up the subscription agreement, which commits an investor to their share in a fund.
Many law firms do this already. But not many do it as efficiently as it could be done.
In fact, it’s often a very time-consuming, manual process with lots of back-and-forth between firms and investors. And the process has to be repeated for every individual investor.
How can technology improve your fund formation offer?
Technology is rapidly growing in importance within PE and VC companies, for example in deal sourcing, execution and exit, and it plays a significant role as a value-creation lever throughout the whole deal lifecycle.
Clients need their firms to stay up to speed with their own technology adoption. So given the importance of onboarding for fund formation, law firms are well advised to digitalize this process as much as they can.
The good news is that firms often have the right technology platform already in place for M&A work and can expand how they use it to shift into PE and VC without new investment.
It’s even better news if law firms already have clients operating in the PE and VC space. If their information is already stored within a template, the onboarding process will be even more efficient, which will drive loyalty and repeat business.
Succeed in the fund formation market
By exploring the fund formation market and leveraging technology to streamline the investor onboarding process, law firms can increase their competitiveness and gain a distinct edge in the PE and VC space.
Where to go next:
Read more about simplifying the investor onboarding process.
Learn about fund formation technology solutions.