Linklaters trumpets new IT tool – but does the City really care?

Will reducing loan documentation time be a key factor for Linklaters’ clients? asks Julia Berris

Linklaters trumpets new IT tool – but does the City really care?” /> Here’s a thought: does technology really make life easier?

While most of the world can no longer imagine getting through the day without email or a mobile phone, constantly keeping up to speed with the latest high-tech computer program is not that crucial to the majority.

Linklaters, however, begs to differ. Earlier this month (22 October) The Lawyer reported on the launch of the firm’s latest IT offering, the Leveraged Term Sheet Generator (LTSG). It sounds complicated, but essentially the LTSG is designed to reduce the time it takes to create loan documentation from 12 hours to just one. All the banking client or Linklaters’ lawyer has to do is answer a few simple questions about aspects of the transaction, such as the jurisdictions involved, the type of loan and its value.

A term sheet for any in-house bank is then created, cutting the time and manpower generally required by the task significantly. The program even incorporates a nifty advice setting that helps iron out any technophobe-type problems. Yes, it has a ‘help’ function.

Which all sounds great. But, with all the complexities involved in modern transactions, is it really wise for in-house banking teams to turn to their computers for a legal document rather than tackling the job with a real life lawyer? Freeing up a lawyer’s time for more detailed and complex duties certainly sounds beneficial, but with other law firm IT programs having fizzled out in the past, is there really any point in trying to convince clients they need a new system?Put simply, no, according to one silver circle partner. “Such documentation is very specific to the deal and to the bank itself,” the partner says. “Banks such as Royal Bank of Scotland [RBS] and Citigroup would have their approved systems that they use to create the first documentation draft. How could a private practice firm do any better and convince them to pay for it?”Linklaters launched the Term Sheet Generator (TSG), the forerunner of the current program, in 2003. This was designed for syndicated loan financing. The TSG invites the bank to complete an online questionnaire that guides the client through several sections to create the appropriate documentation.

The LTSG is part of the same family, albeit providing documentation of a different type.

“The point is to deal with the documentation in a much more efficient way,” Linklaters global head of banking Robert Elliott says. “Obviously you need to analyse the term sheet after and make sure it’s suitable for the transaction and the client is happy with it, but this saves a lot of time with the initial drafting.”

Elliott is certainly excited about the new system, but do potential subscribers to LTSG feel the same?”With many of these products it’s hard to justify the cost,” an investment bank general counsel says, pointing out that, in addition to a one-off induction fee, clients must pay an annual sum to keep using the software.

“We’ve had firms pitch to us and demo systems,” he adds. “They clearly have a purpose, but they aren’t crucial to what the people in the business are doing. The decision to then pay a premium to use such a service doesn’t make sense.”

And this is not the first time the magic circle has attempted to revolutionise the legal profession with IT.

“Often firms use this kind of tool in the tender process,” explains a silver circle partner. “It’s used as a marketing technique. These things could be useful, but when you get down to it a lot of them have struggled to gain widespread success.” Linklaters, a firm keen to show off its innovative IT expertise, was one of the first firms to get involved with the launch of its Europe-wide regulatory program Blue Flag in 1996.

The initiative provides subscribers with up-to-date regulatory and compliance news. “The firm launched it with huge fanfare and it received a lot of attention at the time,” one magic circle partner recalls. “The problem was that they got too ambitious and wanted to make it a global initiative. It still exists, but I don’t know of many people who use it.”

In 2000 The Lawyer reported on the firm’s attempted spin-off of Blue Flag, which aimed to widen the scope of the function to those outside the legal profession.

Subscription to the service cost £5,000 a year, with an additional cost of £1,200-£2,000 per country licence.

Both Allen & Overy (A&O) and Clifford Chance launched online deal rooms designed to speed up cases in the late 1990s and early 2000s. Clifford Chance’s NextLaw provides comparative information on data protection law in Europe, Asia and the US, while A&O’s Newchange dealroom offers an online document posting site that sends email notifications to pre-approved parties.

However, while great in theory, in practice the take-up of the services has been low.

“It does provide a service, but it’s not used now much by clients,” a Clifford Chance source says of the firm’s own system. “I think this can be said of other firms’ IT products set up to help speed up the process.”

The cost of such systems is one obvious deterrent.

“It depends on the service. You can pay £50 for a one-off documentation template, but for an external system provided by a law firm it can reach several hundreds of thousands of pounds,” says one banking in-house counsel. “To make it worth having and functional for the business, it needs to be tailored very specifically. This invariably incurs an extra cost.”

Getting approval for this is not easy to do. While Linklaters will not disclose numbers of subscribers to its term sheet programs, the firm is confident it provides enough of a service to entice banks to subscribe.

“There’s a one-off fee at the beginning and this covers any tailoring the group wants. This could be anything from company logo to specific language used,” says Linklaters consultant Kirsty Thomson.

The firm and the client also negotiate an annual subscription fee that is specific to that particular business. Although there is a headline figure, Linklaters insists that cost is not the important factor for LTSG, explaining that the value it can give to the client is far more crucial.

“We’ve had success in the past for our term sheet generator. These systems are used by us and by the clients,” Linklaters’ Elliott says. “The time spent on term sheets is significantly reduced. This is therefore a very useful tool.”

Despite the scepticism of the banks and the lack of enthusiasm for products released several years ago, one in-house lawyer suggests there is hope for using IT systems of this kind.

“Of course, if you can speed up the process of a transaction then that’s valuable. It’s the practicalities of providing a seamless service that concerns in-house teams,” he explains.

Linklaters is convinced that being first on the block with IT innovations has served it well and helped to strengthen relationships with its client base.

The measure of LTSG’s success, however, will be whether in-house counsel will actually want to stump up the cash for a system that could ultimately prove difficult to integrate into their businesses.