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Content Assessment: Steady Pulse of eDiscovery Market Consolidation and Investment in Q3
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A short assessment of the qualitative benefit of the recent announcement of eDiscovery ecosystem merger, acquisition, and investment activity during the third calendar quarter of 2023.
Editor’s Note: Since beginning in November 2001 to track the number of publicly highlighted merger, acquisition, and investment (M&A+I) events in the eDiscovery ecosystem, ComplexDiscovery has recorded more than 550* M&A+I events.
While not all-inclusive due to the fact that M&A+I events are not always publicly disclosed and some announcements may not represent event completion, the abridged listing of M&A+I events maintained by ComplexDiscovery notes key industry events by sharing event date, company involvement, and known event amounts.
Industry Update*
eDiscovery Mergers, Acquisitions, and Investments in Q3 2023
ComplexDiscovery
Overview of Q3 Merger, Acquisition, and Investment Activity in the eDiscovery Ecosystem (Q3 2023)
The third quarter of 2023 saw a steady pulse of merger, acquisition, and investment activity in the eDiscovery ecosystem. July started off with two reported deals as companies looked to strategically combine forces or attract new capital. By August, the pace accelerated, with eight transactions announced. Industry observers noted the increased appetite for consolidation and growth financing. September rounded out the quarter with a slightly reduced but still healthy level of three deals revealed.
For the quarter as a whole, the double-digit total of 13 mergers, acquisitions, and investments signaled an active environment. However, some analysts wonder whether the gradual decline from August to September might foreshadow a slowing cadence of transactions in subsequent periods if macroeconomic challenges persist. Still, the third quarter provided solid evidence of ongoing dynamism across the eDiscovery landscape. Key players continued to optimize their capabilities and reach through well-timed combinations and funded expansion.
July featured two investment events – Fileread received seed funding from Gradient Ventures and Soma Capital on July 11, and Nextpoint secured funding from RF Investment Partners on July 25.
August saw several deals. On August 15, PC Forensics was acquired by Level Legal. This was followed on August 17 with Thomson Reuters acquiring Casetext for $650 million. Further consolidation took place on August 18 as HBR Consulting, LAC Group, and Wilson Allen merged into the newly formed Harbor. Later in the month on August 28, Tower Legal Solutions received investment from Surge Private Equity for their Avalon portfolio company. At the end of August on the 29th, Reveal Data acquired both IPRO and Logikcull after securing backing from K1 Management.
September brought two acquisitions by Consilio – Lawyers on Demand and SYKE were purchased on September 5. Additionally, Cenza Technologies was acquired by KLDiscovery on September 22.
The series of mergers, acquisitions, and investments in July, August, and September pointed to ongoing consolidation and investment dynamics as companies made strategic moves to optimize capabilities and coverage in the eDiscovery market.
Chart #1: An Overview of Merger, Acquisition, and Investment Events by Calendar Month (2023)
2023 Merger, Acquisition, or Investment Events vs. Month – Q323Overview of Q3 Merger, Acquisition, and Investment Activity in the eDiscovery Ecosystem (2020-2023)
The third quarter has seen a consistently solid pace of consolidation and investment activity in recent years, though the pulse has varied across the July to September timeframe.
In 2020, Q3 dealmaking was robust, with five events in July, five in August, and four in September – signaling a high appetite for transactions during the pandemic disruption.
2021 saw a dip in mid-summer before rebounding; July had four deals, but August increased to six before slowing back to four events in September as the market momentum slowed slightly.
2022 followed a much shallower arc, with the Q3 pulse slowing through the period – two deals in July, two in the normally very active month of August, then two again in September as strategic activity continued its slow tempo.
In 2023, the pace of activity returned to the rates of 2020 and 2021, with two deals in July, an incredibly strong eight deals in August, and three in September.
Though the exact pulse has varied each year and each month, Q3 has remained an important period for strategic consolidation and capital infusion, with dealmaking usually regaining momentum after a summer slowdown. The eDiscovery market continues to persevere through different conditions as key players continue to optimize capabilities and coverage through timely combinations and funded expansion in the second half of calendar years.
Chart #2: 2020-2023 Merger, Acquisition, or Investment Events vs. Month
2020-2023 Merger, Acquisition, or Investment Events vs. Month – Q323Overview of Yearly Merger, Acquisition, and Investment Activity in the eDiscovery Ecosystem (2001-2023)
The eDiscovery ecosystem has experienced fluctuations in merger, acquisition, and investment (M&A+I) activity over the years. Here’s a summary of the yearly M&A+I events from 2001 to 2023, with trends highlighted:
- 2001-2006: In the early years of the eDiscovery ecosystem, M&A+I activity remained relatively low, starting with only 1 event in 2001 and gradually increasing to 17 events in 2006. This period reflects the nascent stage of the eDiscovery industry.
- 2007-2009: The global financial crisis may have contributed to the reduced M&A+I activity during this period, with a slight dip from 15 events in 2008 to 13 events in 2009.
- 2010-2013: The ecosystem experienced a gradual increase in activity following the global financial crisis, with events rising from 19 in 2010 to 22 in 2013.
- 2014-2016: M&A+I activity saw significant growth during this period, with 35 events in 2014, peaking at 41 events in 2015 before slightly decreasing to 40 events in 2016.
- 2017: The year 2017 saw a substantial drop in M&A+I activity to 25 events, possibly due to market or regulatory factors.
- 2018-2019: Activity rebounded in 2018 and 2019, with a consistent 47 events each year, reflecting a stable eDiscovery ecosystem.
- 2020: The COVID-19 pandemic impacted global economies, leading to a decrease in M&A+I activity to 36 events in 2020.
- 2021: Despite the ongoing challenges of the pandemic, the eDiscovery ecosystem experienced a significant surge in M&A+I activity, reaching a peak of 55 events in 2021. This could be attributed to the increased reliance on digital tools and remote work, driving the demand for eDiscovery solutions.
- 2022: The M&A+I activity decreased to 21 events in 2022, which could be a result of market consolidation following the previous year’s peak or other economic factors.
- 2023: The data for 2023 is limited to Q1, Q2, and Q3 with 26 M&A+I events. The 2023 investment pulse rate indications are for a solid year that has already exceeded 2022 activity and should stabilize in the 30-35 event range.
Chart #3: Merger, Acquisition, or Investment Events vs. Year (2001 Through 2023)
Merger, Acquisition, or Investment Events vs. Year – Q323Presentation Slides: Market Kinetics – Investing – Q3 2023 (PDF) – Mouseover to Scroll
0 – Investments – 100723M&A+I Events (Running Listing: November 2001 – Today)
- An Abridged Look at the Business of eDiscovery: Mergers, Acquisitions, and Investments
Assisted by GAI and LLM Technologies
Additional Reading
- A Running List of Industry M&A+I-Related Announcements
- eDiscovery Mergers, Acquisitions, and Investments in Q2 2023
- eDiscovery Mergers, Acquisitions, and Investments in Q1 2023
* Reported numbers may change over time as past events are identified and entered into the tracking database. Not all announcements are tracked as completed events.
Source: ComplexDiscovery
