The emergence of online due diligence deal rooms is growing. From a few hundred deals in 2002 to an estimated 6000 in 2006. The two leaders (Intralinks, Datasite) are now being beset with smaller, cheaper alternatives as the market matures. These smaller virtual data rooms are sold through financial printers, who can digitize hard copy diligence documentation and post it online for accountants, lawyers and relevant parties to review.
On the other side of the spectrum are the legal software companies companies (Hummingbird, Interwoven) that have launched “enterprise collaboration tools” that handle due diligence and the actual collaboration over drafting closing documents. Downside is these enterprise tools tend to be generic for many different legal matters and they are not super intuitive for managing transactions specifically. They also require an investment in implementation and IT resources.
All the law firms I have spoken to recently about online transaction management have some sort of legal extranet. But it appears that when it comes to managing transactions online the software is not being used. Either it’s too complicated for attorneys to use, or simply it’s not a great fit.
With over 3000 transactions being managed online in 2005 (from 450 in 2002), its just a matter of time until law firms take control of running these deals and implementing online transaction management software.