What’s next? That’s the question being asked by the significant number of law firms affected by Thomson Reuters’ sale of Elite, ProLaw, and eBillingHub to private equity firm TPG, creating Elite Technologies.
- Elite and ProLaw never achieved the synergies with TR that were the basis for the acquisitions in the first place.
- Without that strategic framework, the Elite division ended up operating at something of a 2nd tier within TR.
- With the acquisition by TPG, it’s now a standalone business with a singular focus on delivering a “legal-tech platform built for the modern law firm.”
- Following the standard PE playbook, we will likely see better support and development for ProLaw, additional investment in 3E, follow-on acquisitions, and an intense focus on driving revenue.
On the announcement of the acquisition, the Orange Rag included a very telling quote:
“One TR employee told Legal IT Insider that there has been frustration internally with the lack of progress in moving firms to the cloud on 3E and a desire to focus on subscription-based content rather than software. The news is likely to be welcomed within Elite, which has for a long time appeared to be in a state of flux and subject to continual restructuring within the wider TR organization.”
I’ve talked about the challenges of why Elite and ProLaw didn’t work at TR (also in the Orange Rag), which left the division feeling adrift. 3E and ProLaw firms – who are quite committed to the software – would like to see the products on a solid foundation. Many firms have commented to me that they also have felt adrift.
Well, now the landscape has changed. TPG’s acquisition of a majority stake in Elite at a $500M valuation closed on June 1st. Although further details on the transaction aren’t public, it’s a standard playbook for a PE firm to purchase 70-80% of a company, keeping the original owner participating in a future exit and cooperating along the way. That makes particular sense in this case, given some of the entanglements between the Elite division and the rest of TR.
Ranked as the 6th largest private equity firm globally, TPG’s investment creating Elite Technologies, while not colossal in the grand scheme of their operations, still signifies a considerable venture. Typically, a PE firm purchases a business like this as a “platform” – a centerpiece around which to add additional acquisitions. The goal is to bulk up revenue as quickly as possible.
The revenue from ProLaw is more relevant to Elite Technologies than it was as part of TR. This increases the likelihood of better support and development for ProLaw. Given 3E’s majority revenue contribution, expect additional investment to expand the 3E footprint.
The market can expect a more aggressive, focused competitor. While the standard private equity approach would be to elevate revenues and profits before selling to the next PE firm, TPG’s scale suggests a more ambitious strategy might be on the horizon, and it will be interesting to see how it plays out.
I’m not a detached observer here, not just because of my background as the founder of ProLaw and my tenure at West, but because of what we do at nQ Zebraworks, where our workflow products interconnect with 3E and ProLaw among other financial management systems. I have a vested interest in their success.
At the same time, I’m straightforward in my disappointment at the Elite division not becoming a strategic asset at TR and will be quite interested to see TPG’s strategic decision-making. Overall, firms are better off with a standalone business focused on this mission-critical software, with TR maintaining a vested interest in its long-term success.