BPOs looking to buy legal outsourcers

Pangea3, a legal process outsourcing (LPO) firm, is seeing an increased range of activity post its acquisition by the $13 billion news and business information company Thomson Reuters in November.

Sanjay Kamlani, co-founder and co-CEO of the firm, told DNA that the acquisition has brought a new level of credibility to the LPO stable, while adding in the same breath that top IT firms are looking at buying out Pangea3’s competitors. Excerpts from the interview:

Post the acquisition, what does the road ahead look like?
Thomson has brought a new level of credibility and a sense of stability. Prospective clients like top law firms were concerned about the viability of this industry. Now the acquisition has made it clear that this is a serious industry. Thomson has the largest set of legal technology and information databases. Many top-class databases like Complinet, Elite, FindLaw were used by lawyers without realising that they came from Thomson. Post the acquisition, our clients get a combination of our talent and expertise along with these database assets. This is causing clients to be far more interested in these joint solutions. We are seeing substantial increase in interest from new clients, our existing clients and Thomson’s clients.

Do you have Indian clients?
We don’t work for Indian clients as the Bar rules here don’t allow foreign firms to do legal work in India. We can support a law firm but can’t directly work for any client. In the US, the rules are clear. There in each state you have to be a lawyer from that state to practice there. Someone from Florida can’t go to New York and practice. But he can go and help a lawyer there. In India, the rules are not very clear on what foreign lawyers can exactly do.

Which area has seen maximum increase in work post the buy?
Work related to regulatory compliance has increased tremendously. This is a very large area for Thomson and we are seeing a large influx of activity.

So, what is the rate you expect to grow at?
Prior to the buy, we grew by 100% annually, both in terms of revenues and headcount and the same rate would continue henceforth.

Was acquisition always on cards?
We were VC funded (Glemrock Group and Sequoia Capital were investors). So we expected exit from investors at some point in time, and we had to either get acquired or come up with an IPO. We were never built to stay independent. Thomson is No.1 globally in legal industries and we saw a strategic fit. The timing of this buyout was apt. It proved to be good for all stakeholders like our employees, clients and investors. Many buys don’t soothe all three stakeholders. But this left our employees, clients and investors feeling 100% satisfied, as it provided employees with career growth, and investors with a rewarding level of returns.

You see more acquisitions in the LPO space?
Yes of course. I have heard rumours that all the top Indian IT/BPO players are looking at buying our competitors.

Which IT players?
All the top ones. Also the top BPOs. They view LPO as opportunities to go up the value chain and add a new vertical. Also, LPOs bring better margins. We fetch margins which range between 15% and 30%.

How is the LPO space evolving?
The business is becoming global. In India, often lawyers don’t usually go overseas, unlike in the IT space. But we are providing overseas opportunities of 3-12 months to the UK, US, Japan, EU, Switzerland to our employees. And post the buy, due to the global reach of Thomson, our lawyers get more time abroad. They can visit clients abroad and teach lawyers there about our business practices and new ways of doing business. LPOs are taking parts of law which are not specific to a particular geography and are developing expertise which transcends geographies.