Deal Mania Continues in E-Discovery Services Space

The consolidation wave sweeping the e-Discovery services market rolled forward again on Monday when Inspired Review announced it acquired Pittsburgh-based Review Less on undisclosed terms.

Both companies are private and provide “managed services” such as data hosting, attorney staffing and document review.

Inspired Review lists on its website four offices — in Washington, D.C., New York, Florida, and Nashville. CEO Michael Dalewitz, who is based in New York, said the company’s largest office is an 18,000-square foot document review center in Washington, D.C. that can seat 450 attorneys, and also that it recently opened a fifth location in Frankfurt. As a result of its acquisition of Review Less, Dalewitz said the company will add offices in Pittsburgh and Chicago.

The acquisition continues a recent deal spree among companies that provide document review and other e-Discovery services, that in recent months has seen a half-dozen mergers:

  • Investment firm the Carlyle Group acquired LDiscovery in a reported $150 million deal. LDiscovery has made six acquisitions in the last two years.
  • The patent risk management company RPX purchased Inventus Solutions for $232 million.
  • Advanced Discovery purchased LPI and U.K.-based Millnet on undisclosed terms. 
  • Consilio, after receiving funding from the Los Angeles private equity group Shamrock Capital, purchased Huron Legal Group for $112 million. It made two other acquisitions, as well.
  • Epiq Systems acquired Iris Data Services for $134 million.

To explain the industry consolidation, Evan Morgan, a partner at the venture capital firm Revolution Growth, which partnered with Carlyle on the LDiscovery deal, said his firm’s investment theory was straightforward: They purchased a growing company with strong cash flows.

“If you think about litigation, it’s only proliferating,” said Morgan.

Meanwhile, data is also proliferating in new communication formats such as instant message, twitter, digital voice messages and others, which creates demand for managed services companies. Despite advances in “predictive coding” and other technology-assisted review, many investors believe the process is unlikely to be fully automated anytime soon.

“We don’t think manual review is ever going to go away,” said A.J. Shankar, CEO of the Everlaw, “at least not in the next half-decade to a decade.”

Everlaw produces a document review software tool and last week closed $8.1 million in Series A funding from Andreessen Horowitz, the same Silicon Valley venture capital firm that backed Facebook and Twitter. Shankar said his company is focused on developing “artificial intelligence tools,” but is also interested in designing a software that is more intuitive and easy for users to learn and master.

Dalewitz, the CEO of Inspired Review, said he named his company after a lyric from the Grateful Dead song Terrapin Station. His company is focused on paying better wages to review attorneys it contracts with to document review, so it can attract top-notch talent, he said.

“That’s what Inspired Review is all about,” said Dalewitz. “We want to see people high five-ing and excited about what they’re doing.”