Richard Brait and Kathy Orysiuk are always looking for new ways to deliver greater value in-house at Siemens Canada, part of the German global manufacturing conglomerate Siemens AG. In fact, it’s part of the global legal team’s innovation challenge to come up with ways to approach work differently.
So, when an acquisition transaction in the healthcare sector came their way recently, Brait and Orysiuk took the opportunity to use it as a test case for some of the new technologies being touted in progressive legal departments and law firms around the world. They wanted to see artificial intelligence tested during a transaction in real time. “I thought, ‘Let’s make it a requirement for whatever law firm does the work that they pilot some new technologies,’” says Brait. The company eventually chose Blake, Cassels & Graydon LLP (Blakes) in Toronto, which shared Siemens’ interest in trying new technologies on the deal.
There are 20 people in the legal department at Siemens Canada and globally about 100 Siemens lawyers work on M&A transactions. Other than six M&A lawyers in the United States, Orysiuk is one of only a handful of members of the core M&A team outside of Germany. “We don’t yet have AI solutions we are applying in all of our M&A transactions, but at least one of the software products Blakes was proposing was a product that I knew Siemens had trialed at least two years earlier,” says Orysiuk.
Working with Blakes, Siemens embarked on a number of pilot projects for the transaction, including use of a document drafting tool that helps proofread and check references and terms as well as a closing agenda system that gained efficiency in collecting signature pages and creating closing books. They also tested a few leading AI diligence engines and compared them with human results.
For the document drafting, Blakes used a tool embedded in the word processing system in Microsoft® Word that aims to eliminate some of the administrative work done by junior lawyers in checking documents. “We found the document drafting tool did increase the quality of documents – it virtually takes all errors out of agreements and cuts down on that junior associate time,” says David Kruse, partner at Blakes. “We did find some false positives and, like a lot of technology, we have to remember it’s not completely infallible and can’t substitute the work done by lawyers.”
“What the results showed us is that the tools are good for checking certain clauses, such as governing law. We realized, however, that the most important thing was not the accuracy-percentage of the tool, but the efficiency gains. Here we saw that even though the tools were not completely accurate, we still had substantial efficiency gains with accuracy similar to the human-only review.”
The team also created a collaborative closing agenda online for the Blakes and Siemens side of the transaction.
“Anyone in the transaction team could go in and see where documents are and what the drafts are,” says Kruse. “And the one big benefit was, at the end of it, you have your record book that can be completed by pressing a button instead of spending tens of hours of legal time completing a record book after everyone thinks the transaction is finished.” The team found there was some additional up-front work required in doing that task, but overall the time saved was significant.
The AI due diligence tools were tested post-closing using 90 of the “few thousand contracts” acquired in the transaction. The contracts were reviewed using a human-only approach and at the same time, separate members of Blakes’ inSource alternative service delivery team ran them through a couple of AI diligence engines. “The software is very good at things … like assignability and chain of control,” Kruse explains. “The results were less strong on things more unique to the transaction.”
They discovered the review done by people from the Blakes’ inSource team working with the technology actually cut the average review time by about 50% and resulted in a similar level of accuracy to the human-only review.
“What the results showed us is that the tools are good for checking certain clauses, such as governing law. We realized, however, that the most important thing was not the accuracy-percentage of the tool, but the efficiency gains,” Orysiuk says. “Here we saw that even though the tools were not completely accurate, we still had substantial efficiency gains with accuracy similar to the human-only review.”
When it comes to assessing the risk on such projects, Brait says that he follows his philosophy on working in-house, which is to understand where the risk exists and assign resources accordingly. “I’m very much of the mind that you limit your view to what matters. In our commercial practice, for example, we won’t look at a contract if it’s under $150,000,” Brait says. “We have a process and we trust the process. We know it introduces more risk, but we’re prepared to take that. I see tools like this and think this is a great supplement to that process.
Siemens is also working with Blakes on a regulatory application using a technology tool that it hopes will eliminate half the time required. “The key is to identify where you need processes and then look at where the risk is and decide whether you can bring tools in to automate all or some of your processes,” says Orysiuk.
“You should not be reinventing the wheel – you really need to focus on what is low-value work, what is low-risk and what is important to the business. Where do you have exposure, and where do you not? You need to start with the basics and not think the tool is going to be your solution.”
A version of this article appeared in Canadian Lawyer.