Breakdown of Clio's acquisition of vLex

The biggest M&A transaction in the LegalTech space

Introduction

In one of the defining moments for LegalTech, Clio has acquired vLex for $1 billion. This marks the biggest M&A transaction in LegalTech. The deal was financed by a Series G raise of $500 million by Clio valuing it at $5 billion. Clio has cemented its status as a fast evolving category leader in the nascent LegalTech space.

LegalTech is a sector that has often been held back because of the lack of capital in comparison to its peers such as Fintech and Healthtech. This is a watershed moment for LegalTech and a signal that it is entering an era of scale.

The Players and Deal

Clio was founded in 2008 and is one the global leaders in LegalTech. Clio offers a diverse range of products for lawyers such as legal billing, case management, document automation and legal research etc.

vLex was founded in 2000 and is mainly known for its flagship product called “Vincent”. Vincent is a legal assistant that automates research, streamlines litigation and transaction processes and provides strategic legal insights such as understanding the judge’s litigation history and reasoning patterns.

Deal Math

The M&A transaction was funded by a Series G raise of $500 million from investors such as New Enterprise Associates, TCV, Goldman Sachs Asset Management, Sixth Street Growth and JMI Equity. The financing of the transaction included a significant debt component of $350 million from Blackstone and Blue Owl Capital. These two private credit funds have a history of supporting high-growth and innovative SaaS companies.

Oakley Capital, one of the majority shareholders in vLex chose to take stock as part of Clio signaling investor confidence and long-term sustainability of Clio.

Why does the deal make strategic sense?

Clio’s acquisition of vLex marks the launch of the Intelligence Legal Work Platform that transforms Clio from a system of record to a dynamic system that leverages vLex’s database that has billions of documents from different jurisdictions. The acquisition is a vertical integration play.

Clio is able to make use of vLex’s client base expanding its reach from small and mid-sized firms to the world’s largest law firms and in-house teams. Previously, Clio acquired ShareDo which was adaptive work management platform for lawyers. This evolved into Clio Operate that has expanded into US and developed a dominant presence in the UK.

Similar to this, vLex will be rebranded as Clio for Enterprise and the unique moat that Clio has achieved through this transaction the legal intelligence database that vLex has developed. The database is vast and containing document ranging different jurisdictions. This will help Clio help achieve it’s goal of global expansion.

Conclusion

The acquisition of vLex marks an inflection point in the LegalTech where the industry is starting to see consolidation and capital inflows that are sustaining billion-dollar acquisitions and valuations. Furthermore, this shows that LegalTech startups have a long-gestation period and the right investment could deliver superior returns (vLex).

Clio wants to build the next layer of legal infrastructure by leveraging its existing operating system and the legal intelligence database that vLex has built over the years. The future of the law is not only in AI models and software but in building databases that can be leveraged as well.