Consilio and Advanced Discovery merger: the analysis

We caught up with Consilio’s CEO Andy Macdonald (pictured) and managing director Drew Macaulay to get the low down on its combination with Advanced Discovery, as lead ED commentator Andrew Haslam says this is a merger with much to recommend it and little obvious overlap.
In a dramatic shake up of the eDiscovery (ED) market, on 21 March, San Francisco private equity investor GI Partners announced that it will acquire leading ED players Consilio and Advanced Discovery (formerly Millnet in the UK) and combine the two businesses, creating the #2 global market leader after Epic. Macdonald will continue as CEO, with Jim Burke, formerly CEO at Advanced Discovery, expected to take a board level position.
While the ED market is no stranger to recent consolidation (including four acquisitions apiece by Consilio and Advance Discovery themselves), this latest combination dwarfs previous mergers and acquisitions, resulting in a combined company that will consist of over 2,500 employees and operate more than 60 offices, review centres, and data centres spanning 11 countries. While the combined revenue ultimately will be public it has yet to be disclosed.
The full solutions suite will include information governance, risk management, eDiscovery, and document and contract review.
Mechanics of the deal
Consilio and Advanced Discovery were both previously backed by private equity investors: Consilio by Shamrock Capital and Advanced Discovery by Trivest Partners. Shamrock partnered with Consilio in August 2015 and conducted four acquisitions – including Huron Legal – in short succession. Trivest invested in Advanced Discovery in 2014 and has also made four acquisitions including Millnet in the UK.
Macdonald says: “The point of partnering with Shamrock was market consolidation: the biggest reason is client expectation around capital investment to meet data privacy and financial audit needs.”
While Consilio looked at acquiring Advanced Discovery with Shamrock as its backer, it would have put the fund over its investment cap for one asset. Macdonald said: “GI was looking and we talked it through and said we’d do it together. Shamrock was excited to make that happen.”
He adds: “Private equity investors really want to make sure they are aligned with management: we felt good about each other and aligned with how we can drive growth. “
Time frame
In the fourth quarter of 2017 Consilio started the ball rolling with the heavy lifting taking place in past three months.
Macdonald says: “I had several conversations with Jim Burke: we met for lunch in September in New York and felt the two businesses were culturally aligned and had same philosophy on growth.
“Sometimes merging companies creates so much ill will among clients and employees it’s not worth doing but here there was a cultural similarity and minimal client overlap: less than 5% of our clients are shared. There is a real upside in that the Advanced Discovery client base is largely UK and US while we offer a significant footprint in Asia.”
We have reported regularly over the past two years on the rapid consolidation in the ED market, which is often driven by clients’ demands for a seamless global service. Macaulay said: “My remit is to look after continental Europe, the UK and Asia and what we’ve seen over the last few years is a dramatic increase in sophisticated buying by  organisations from banks to technology and pharma companies: they are looking to buy from the companies they trust the most not just in the US but Europe and Asia.
“The more we invest in our capability to serve those customers the more chance we have of securing a large percentage of that market. If you look at General Counsel, you’ll see more advisers taking control of how eDiscovery is brought and bringing all the decisions in-house rather than leaving them to law firms.”
While there are bound to be overlaps across some sales teams, and not all the big personalities at Advanced Discovery/ Millnet may welcome the acquisition, the combination will enable the combined organisation to streamline its operations and invest in innovation – that’s the plan.
What’s in a name?
Deciding on a name is going to be an immediate challenge, although the powers that be at Consilio the combined organisation have hired a consulting firm and are hard at work doing some brand analysis. They are fairly confident that they will have a decision by the second quarter of 2018: but the year it took for Epic to decide on a name following its merger with DTI hasn’t exactly set the bench high.
Macaulay said: “The thing I’m most excited about is that Advanced Discovery’s largest office by headcount is in London so when you put the two companies together we’re going to end up being the largest pure play eDiscovery provider in London with a bench to handle much larger matters.
“I’ve worked with a number of very talented people in Advanced Discovery and we’re looking forward to seeing what we can do to take eDiscovery forward, including the use of artificial discovery.”
Deal close
Advanced Discovery is expected to close in late March 2018. Consilio and the subsequent merger are expected to close in the second quarter of 2018, subject to usual and customary closing conditions. Financial terms of the transaction were not disclosed.
 
Market comment
Andrew Haslam, eDisclosure project manager at Squire Patton Boggs says: “In the UK, Millnet and Consilio complement each other. Consilio did really well out of the Libor investigations and developed its own software that let you get at all the Bloomberg emails. Consilio also gained consulting capability from their Huron Legal acquisition. The key thing is that processing margins are dropping down the toilet – that’s how small firms made their money. The future is in consultancy. All eDiscovery technology is going to end up in the cloud with lots of functionality whether its Relativity or not Relativity. But the real differentiator will be if you have got people worldwide who consult.
“Consilio has a presence in the Far East and Asia Pacific, which is good because it means that Advanced Discovery are now part of a big worldwide organisation. It’s interesting that GI bought out the other two private equity owners and got the controlling interest: they must have seen that there’s a hell of an opportunity. There might be some redundancies, but I don’t expect a lot.”
This article first appeared in the March Orange Rag, to register for your free copy click here: https://www.legaltechnology.com//latest-newsletter/

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