Given the threat of recession and other headwinds, no one expects a particularly robust deal environment in 2023. Yet, when the economy worsened in 2022, the private equity (PE) industry proved to be agile and resilient, finalizing more than $1 trillion in deal volume.
The PE industry’s durability suggests fund managers will face fierce competition for available deals this year. Firms will be looking for any way to gain an edge over their competitors, including through the use of artificial intelligence, automation, and outsourcing.
One way to build a competitive advantage is by speeding up the non-disclosure agreement (NDA) process. According to a recent survey by Ontra, conducted by Wakefield Research, 58% of respondents said their firm’s NDA process had hurt their ability to close a deal in the past year. Faster NDAs enable firms to dive into due diligence earlier, make decisions quicker, and close on winning assets.
Delays in traditional NDA negotiations
High in-house workloads
When asset management firms handle NDAs and other routine contracts in-house, the work often falls on in-house counsel or business professionals. Both groups must task switch and, at times, deprioritize strategic work to complete routine agreements in a reasonable time.
According to Ontra’s survey, 65% of respondents said they spend an average of six or more hours per week on NDA negotiations. Because these professionals must find the time for NDAs between other tasks, they might inadvertently slow down the process.
Lack of predefined contract terms
Another reason for delay stems from firms lacking contract playbooks. In Ontra’s recent survey, 84% of respondents said their firm had developed guidelines or a playbook for negotiating NDAs, but only 33% strongly agreed with the statement, “My firm negotiates consistent positions on common terms across all of our NDAs.”
Without predetermined stances or without abiding by the firm’s playbook, the person handling the contract might fully negotiate each agreement from scratch. This undefined process could lead to unnecessary negotiations, particularly if the professional takes a strong, off-market stance, and inconsistent terms across NDAs.
Off-market terms
Off-market terms are more likely to arise without carefully crafted contract playbooks. Instead of the parties negotiating from one reasonable position to another, one side must tackle an unreasonable request, which takes time and could even prematurely end a relationship.
Outside counsel
Some asset managers send private equity NDAs and other routine agreements to outside counsel. While the law firms that typically work with private fund managers and other investment firms have a wealth of expertise, low-level associates tend to handle high-volume, routine contracts.
These BigLaw associates likely face similar issues of having high workloads and no contract playbooks to use in negotiations. They might also not be skilled negotiators, leading them to take overly strong stances and, at times, demand off-market terms. Associates might delay NDAs with unnecessary negotiations instead of focusing on reasonable market terms and speed.
Ontra conquers contract workflow delays
Ontra’s Contract Automation solution enables asset managers to finalize NDAs and other routine agreements faster, so they can get into due diligence and the meat of their deals sooner.
Contract playbooks
Ontra starts with a contract playbook. Customers may be eligible for one of three tiers — standard, advanced, and premier — that enable their freelance lawyers to negotiate more or less based on the customer’s preferences. Whichever tier and playbook the customer qualifies for, their lawyers will have consistent guidelines on which to base their negotiations.
Preferred & fallback terms
Ontra’s contract playbooks include preferred terms, fallback terms, and other negotiation notes, such as unacceptable and preferred language. These playbooks enable Ontra’s legal network members to quickly mark up contract drafts and move negotiations forward. The customers’ defined positions also significantly limit the back-and-forth necessary to finalize an agreement.
On-market terms
Another critical aspect of Ontra’s playbooks is the ability to provide asset managers with current, on-market terms. Ontra’s legal network has processed over 750,000 documents for more than 500 financial services clients and, in 2022, processed over 200,000 NDAs. Given Ontra’s extensive contract intelligence, we’re able to guide our customers in recognizing off-market terms and correcting positions that would likely delay negotiations.
Many firms choose Ontra’s hyper-efficient standard-tier NDA playbook. In this playbook, Ontra leverages its expertise to determine on-market preferred and fallback terms. As a result of our off-the-shelf playbook, many customers finalize NDAs within a few quick rounds of negotiations rather than days or weeks of back-and-forth.
Dedicated lawyers
While Ontra is not a law firm, it has established a global Legal Network of independent contractors, who are available to represent Ontra’s customers in NDA and other routine contract negotiations.
Ontra’s in-network lawyers typically have in-depth private funds experience, which means asset managers no longer have to place the burden of high-volume, routine contracts on their in-house counsels’ shoulders or pay outside counsel’s significant fees. Ontra vets and trains its legal network members to provide the best possible representation to private fund managers and investment banks in all major jurisdictions.
24-hour turnaround time
Ontra customers benefit from a 24-hour turnaround time on the first markups of an NDA or other routine agreement. Such immediate attention to a new contract ensures negotiations get started and move forward without delay. Customers can even view the progress of their contract negotiations, including timestamps for each activity, within Ontra’s Contract Automation platform.
Electronic signatures
Ontra’s Contract Automation platform includes a DocuSign integration. While many parties already rely on some form of electronic signatures, the DocuSign integration enables Ontra’s customers and outside parties to efficiently execute finalized agreements through the platform on any device.
Faster NDAs, faster deals
Private equity NDAs are an essential part of the fund lifecycle. Yet they can delay essential due diligence during a high-stakes time. By partnering with Ontra, private fund managers can take advantage of freelance lawyers around the globe, a more efficient contract workflow, and shorter NDA turnaround times.
