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November 19, 2010 1:52 PM

Allen & Overy, Kramer Levin Advise on Thomson Reuters's Indian LPO Buy

Posted by Brian Baxter

Financial information giant Thomson Reuters is entering the growing Indian legal process outsourcing market with the acquisition of Pangea3, a New York- and Mumbai-based company that provides legal services to international law firms and corporations.

Thomson Reuters, which also owns legal research services company West Publishing, is now seeking to become a player in the emerging market of offshore legal services, where India has carved out a niche.

A year ago The Am Law Daily provided a glimpse into India's LPO industry, speaking with a former associate at two U.S. law firms who had decamped to Bangalore to work for another top LPO called Clutch Group. This October, The American Lawyer's chief Asia correspondent, Anthony Lin, took a close look at the thriving LPO sector in India by focusing on the big players, such as Pangea3.

Pangea3 was founded in 2004 and currently employs about 450 lawyers throughout its offices, with plans to double that number within the next year, according to The American Lawyer.

The value of the Thomson Reuters deal was undisclosed, but India's Business Standard values the acquisition between $35 million and $40 million.

Allen & Overy corporate partner Peter Harwich and associate Jeff Olson advised Thomson Reuters on the transaction. The firm acted for predecessor company Thomson Corporation when it acquired Reuters in a $17 billion deal in May 2007 that created a global news and business information giant. Deirdre Stanley is the combined company's general counsel. Thomson Reuters first entered the Indian legal market last year when it acquired legal database business IndLaw Communications for an undisclosed amount.

Pangea3 turned to Kramer Levin Naftalis & Frankel corporate partner Eric Lerner, tax partner Barry Herzog, employment partner Paul Ritter, and associate Seth Merl for outside counsel on its sale. Kevin Colangelo, Pangea3's general counsel and vice president of legal services, cofounded the outsourcing and technology transactions practice at Kramer Levin.

The Indian legal press is hailing the deal as a major move for Pangea3. Legally India reports that Pangea3 has received at least two private equity investments since being founded six years ago and that the current investment by Thomson Reuters demonstrates the financial viability of Indian LPOs. (Legally India notes that another U.S./Indian LPO called UnitedLex recently scooped up a smaller rival in Los Angeles-based LawScribe.)

In announcing the transaction in a press release late Thursday, Thomson Reuters stated it expects the Indian LPO market to grow 20 percent annually and exceed $1 billion in value by the end of this year. Indian consultancy ValueNotes Database predicts $1.1 billion in LPO revenue by 2014, according to The American Lawyer.

Pangea3 will retain its name as a division of Thomson Reuters Legal, according to Legally India. The newly acquired company also has plans to expand in the U.S. with new onshore service centers. Pangea3 co-CEO Sanjay Kamlani told Legally India that his firm pursued the deal with Thomson Reuters because of synergies and opportunities for growth in the U.S.

"We are ramping up our hiring in the States and will be hiring a lot of people," fellow co-CEO David Perla told The Am Law Daily. (Perla once worked at Katten Muchin Rosenman.)

Last month sibling publication The Legal Intelligencer reported that LPOs were challenging large firms for work by providing specialized services at lower rates. Perla told The Intelligencer that about 80 percent of his business came from in-house legal departments.

Pangea3 makes most of its money on document review for litigation and government investigations, while also handling corporate services like drafting and reviewing contracts, Perla told The Intelligencer. Perla predicted Pangea3 would increase its business by 250 percent in the current fiscal year, something the company figures will be easier under the Thomson Reuters umbrella.

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One thing that the legal, financial, educational, and news information giant, Thomson Reuters, has not been accused of is ignorance. Given that this multi-billion-dollar company has acquired 100% of the shares of an Indian legal outsourcing provider, after also recently deciding, for "strategic" reasons, to sell its profitable and high-profile U.S. bar exam preparation course (BAR/BRI), you can assume that some very smart money is betting on a tectonic shift in the Western legal landscape.

Padmavathi Shanthamurthy
High-end legal outsourcing

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