16.12.2018 | Blog Contract Analyzer helps with due diligence reviews
When purchasing a company, all risks must be uncovered that could potentially reduce the value of the object of purchase. In due diligence procedures, lawyers, specialist lawyers and auditors examine the possible risks involved in a company purchase. In the past, contracts had to be worked through manually page by page, the relevant parts had to be marked in colour with the highlighter and then transferred into a structured form. Today it is possible to automate a significant part of the work through technology.
Classifying contracts through machine learning procedures
The time pressure for the review and evaluation is very high for lawyers, and the volume of documents to be reviewed is often difficult to realize manually. Machine Learning, the so-called text classification, helps to sort the sometimes large quantities of documents accordingly. Based on monitored learning procedures, it automatically assigns documents to predefined categories, such as “rental contracts” or “employment contracts”. The software analyzes which keywords and concepts occur particularly frequently in the document – and which are missing – and then assigns them to the appropriate category. If the software is insecure, it plays the document back and the human expert has to assign it manually – which again is used as a new learning input.
If all documents are assigned to the correct category, the auditor has a better overview of which contracts exist at all and can divide up his teams accordingly and structure his work accordingly.
Now the teams can start reading and checking the contracts. This process is very laborious and time-consuming – just imagine the large number of employment contracts that have the same wording on several pages, but differ in a number of decisive points, such as notice periods or collective bargaining. The danger that essential aspects are overlooked is particularly high here.
Contract Analyzer as an intelligent reading aid
Contract analysis software such as Contract Analyzer supports many different contract types such as rental contract, supply contract, customer contract, leasing contract, employment contract, credit contract or partnership agreement. As an intelligent reading aid, it accelerates the checking of contracts and recognizes hundreds of contract clauses and data points, such as addresses, account numbers, job roles or landlords, and lists them clearly in structured form. Whether a severance clause or information on the end of the contract – the processor receives all the essential information on the contracts at a glance – and in a fraction of the time originally required.
Conclusion: Save time and money, minimize risks
Contract analysis software such as Contract Analyzer saves an enormous amount of time and resources in due diligence reviews: For lawyers on the one hand, because they can work through more contracts in the shortest possible time with the intelligent reading aid, they have to use fewer resources to do so and they no longer overlook any relevant clauses. The potential buyer, on the other hand, benefits because he can fully assess all the risks and costs of the imminent real estate purchase or company takeover.