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Exclusive: Payday for Pangea3 founders, staff in Thomson Reuters buy; LPO to build onshore centres in US

Pangea3-Sanjay-Kamlani Pangea3’s full acquisition by Thomson Reuters could trigger others to follow suit, predicted the legal process outsourcing (LPO) provider’s co-founder and CEO Sanjay Kamlani in an exclusive Legally India interview, as hundreds of employees will receive a windfall from the sale that will see Pangea3 explore synergies with its new parent and expand with onshore operations in the US.

Only one week after US-Indian LPO UnitedLex bought California-headquartered LawScribe, Pangea3 at 3:30 am Indian time this morning closed its sale to Thomson Reuters, a company which provides data, information and news services but is a new entrant to the LPO game.

Former OfficeTiger CFO and GC Kamlani, who founded Pangea3 together with former GC David Perla, told Legally India that Thomson Reuters had acquired 100 per cent of Pangea3’s shares. Of these roughly 50 per cent were previously owned by outside investors and private equity houses Sequoia Capital and Glenrock Group, which had bought $7m and $4m stakes in 2007 and 2006 respectively.

Kamlani (pictured) added that “probably a couple of hundred” Pangea3 employees were holding employee share options (ESOPs) and would receive consideration from the deal on a one-to-one basis for every share they held, and that in the past there was a time when every Pangea3 employee was getting ESOPs.

Kamlani, Perla, managment and employees jointly held around the other half of the LPO’s equity before yesterday’s sale but Kamlani declined to comment on Business Standard’s cited transaction value figure of $35 to $40m.

One rival in the LPO sector commented that he thought that Thomson Reuters probably picked up the LPO for less. “Not a single LPO has ever been valued,” he said. “The purchase prices in both UnitedLex/LawScribe and Pangea3/TR are ‘reported’ by ‘unnamed’ sources. But TR is a public company, and check its annual report sometime in the next year [...] though TR may not even list it. Let's see then what the actual purchase price is but TR's annual report will be the first time an LPO will be valued.”

The Pangea3 name would remain unchanged, said Kamlani while adding that a tagline might be added branding the LPO as a division of Thomson Reuters Legal.

Expansionary synergies

Pangea3’s CEO explained that they had decided to be acquired by Thomson Reuters because of the opportunities for synergies and the LPO’s US expansion plans.

“There’s been a lot of interest that has come from both private equity and others in the market but it was very clear to us that Thomson Reuters was far and away a great fit for our organisation culturally and in terms of business – the Thomson Legal business, everything they have in their business, is synergistic with our portfolio,” said Kamlani.

He said that Thomson Reuter’s legal database product Westlaw was probably the biggest synergy, in addition to a number of database and IP-related assets that would add value to Pangea3 clients. The LPO’s lawyers, who already did legal research, could also co-operate with Thomson Reuters businesses although this was yet to be decided he said.

Recounting the path to the acquisition, Kamlani said: “We set out to raise capital but concluded that we needed to raise capital and have a strategic partner, and this includes things like building an onshore presence in the US.”

Pangea3 currently has a US presence for BD and marketing purposes, but the company would now start building US-based onshore delivery centres in the US to mirror the Indian LPO centres, although they had not yet decided on location, headcounts and financials of such an operation, which Kamlani conceded would have lower margins that LPO in India.

“One reason we like it a lot is to offer 24/7 service,” Kamlani explained the decision. “We don’t’ offer 24/7 from India – because we don’t work from shifts but our lawyers have professional work schedules as any other international lawyer does. We couldn’t possibly cover the full business hours of the US.”

He added that Obama’s tax proposals were not a motivator. “It’s really about providing the great customer experience and I hate having to tell the client that we can’t help you right there [onshore in the US].”

Innovators and imitators?

Kamlani declined to confirm whether the sale deal included a lock-in of himself, Perla and other senior management to remain with the company but said: “I’ve made a commitment that we are here and we are excited to keep building the business. I’m here [in Mumbai] and David’s in charge of the BD side and the company moves forward just as it is.”

“Yes, we’re owned by another company but I’m still running the business,” he said, adding that many other companies under the Thomson Reuters umbrella would function similarly.

“We’re very excited about leapfrogging the competition,” added Kamlani. “We already believed we were number one in the marketplace - in other respects maybe not - but I really believe this acquisition is going to make Pangea3 far and away the number one player in this industry. And to me that’s very exciting and what we’re going to do in terms of our vision, which is really to change the way lawyers practice for the better and help lawyers do their job better across the globe.”

“The combination is very strategic in that regard,” noted Kamlani. “It’s very possible that this transaction triggers others like it.”

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Like +1 Object -0 Anonymous guest 20 Nov 10, 03:39
The acquisition of Pangea3 reminds me of the early days of BPO takeovers in the dusty township of Bangalore in the mid 90s. This could be the start of the promises held so long by the LPO industry in India.
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Like +1 Object -2 Anonymous guest 20 Nov 10, 03:51
LPOs have nothing to do with practice is not something what LPOs do..............
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Like +1 Object -1 Anonymous guest 20 Nov 10, 04:35
Thats true but a harsh truth for a i have voted down
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Like +1 Object -1 Anonymous guest 20 Nov 10, 05:01
SO pangea insiders..what sort of average earnings you are expecting?
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Like +1 Object -1 Anonymous guest 20 Nov 10, 06:03
@2: I find your comment misleading and misplaced.Though LPOs do not per se provide "legal advice", but lot of legal reasoning is involved in some of the works that a LPO does, specially in the field of Contract Management.
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Like +0 Object -0 mubashshir.sarshar 20 Nov 10, 06:07
great news actually.... will defiantly pave way for more such deals... pay off time....
but what about The glenrock group which have been the most prominent finance group for Pangea... where do they stand in this deal??
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Like +0 Object -0 Anonymous guest 20 Nov 10, 07:45
Wonderful. Thompson ko bhi bakra banaya.
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Like +0 Object -0 sushant 20 Nov 10, 12:03
Im sure many "actual" lawyers feel that LPOs dont do "real" lawyer work but we need to see the bigger picture. Think of the employment it will help generate. Right now with all the new National law schools coming up there are around 3,500 elite law grads being pumped out every year not counting the hundred thousands from minor law schools through out the country. We definitely need more avenues for employment. If LPOs are the solution then so be it.
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Like +0 Object -0 Anonymous guest 21 Nov 10, 04:09
Yes, with a new national law school being opened every other day, can Indian industry absorb so many "corporate" lawyers, given that very few in these law schools want to go into litigation.

Which may be a blessing in disguise: the guys who fail to find a berth in a traditional law firm, could perforce have to take a job in an LPO. And the LPOs might be able to get better quality recruits - right now the quality varies alarmingly, from the abysmal to the sublime. But it is very frustrating to assemble a team of competent lawyers.

At the end of the day it is quality, quality, quality....and LPOs will have to deliver at competitive rates.

And #2, you will be surprised by the nature and complexity of work done by some LPOs.
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Like +0 Object -0 Anonymous guest 21 Nov 10, 07:02
@9:I work for a leading LPO in Bangalore.I find your comment absolutely correct.I believe LPOs provide an attractive career option to young law graduates.@2:Better check ur facts before u make judgement calls on the quality of work done inside a LPO.
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Like +0 Object -0 Anonymous guest 21 Nov 10, 15:11
m a bit confused as to wht would be the effect on salary of employees... what cn a prsn who is abt 2 join Pangea expect out of this acquisition...
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Like +0 Object -0 sushant 22 Nov 10, 05:12
Well. The salary will definitely increase. The acquisition was made for a huge sums and by people lot smarter than us. Those who are a part will in most likelihood benefit.
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Like +0 Object -0 Anonymous guest 01 Dec 10, 21:55
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.

High-end legal outsourcing
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