In the previous two DealTech articles, I discussed how DealTech can revolutionise investment banking through automation and optimisation. In the first article, I introduced the concept of DealTech and how an investment banking deal-making process is largely manual. I explored the room for automation and how the industry might react. In the second article, I delved into the specific areas where I think automation can occur. In this article, I will explore how we can make this automation happen (largely based on my experience of automating these processes already).
Obviously, the financial modelling which underlies each investment banking deal is low hanging fruit, but I believe that where we can start is legal documentation. Many people not familiar with an investment banking deal will be astounded by the sheer volume of contracts and how detailed and large these contracts are! Even with standardised forms of legal agreements such as those provided by the LMA documentation guidelines, legal documentation is a very large part of the deal-making process. It’s no surprise to investment bankers that legal firms have some of the fanciest buildings in town.
So, what has the legal profession done in the way of automation? As I mentioned in the previous article – quite a lot! In fact, DealTech is also the name of a blog which focuses on transactional legal technology. According to them, “By ‘DealTech’, we mean the transactional tools and technology that help lawyers and other professionals get deals done. Most narrowly, DealTech comprises transaction management platforms, assisted contract review tools, etc., but we think DealTech should also embrace a range of other technological tools and products—from document management solutions to time-keeping and billing tools—that are essential to running an effective transactional practice”.
I, of course, have my own, slightly broader definition of DealTech, as defined in the first article I wrote on the matter.
The tools showcased on their site include software for automated review and approval of contracts, transaction management tools for streamlining closing checklists (I assume these are CPs or what’s known as Conditions Precedent to closing a deal), and contract review and analysis software. Eigen Technologies uses AI to read and analyse complex legal contracts. One could easily assume, based on this list, that law is leading the DealTech field! Surely investment banks are next?
Given that the legal profession has made such significant strides in using technology to make their lives easier, how can investment banks follow their lead? The answer, in my opinion, is far more about the human element than the technology required, which largely already exists.
I believe that investment banks need two key human elements to proceed on the DealTech journey:
Practically, an investment bank needs the following to best take advantage of the data science possibilities that lie before them.
To conclude, there are clearly two aspects when it comes to building the investment bank of the future – a human change management and negotiation element, and technical infrastructure and capability.
In the next DealTech article, I will outlay my proposed structure for a data science and data engineering team within an investment bank.