Clio buys AI legal tech vendor vLex for $1-billion in second major deal of 2025
The deal expands Burnaby, B.C.-based Clio (officially named Themis Solutions), which sells practice management software to lawyers, into a new business and for the second time this year at least doubles its potential addressable market.
It also pits Clio against heavyweight rivals: Canadian legal software giant Thomson Reuters Corp. and Relx PLC's LexisNexis unit. (Thomson Reuters' controlling shareholder, the Thomson family, own The Globe and Mail)
The acquisition, Clio's sixth, brings 'the business of law and the practice of law capability under one roof,' chief executive Jack Newton said in an interview.
'We are reforming the company and reshaping it with AI at its heart. It puts us on an entirely new trajectory.'
Clio said Monday it had signed a definitive agreement to buy Barcelona-based vLex from European private equity firm Oakley Capital for stock and cash.
Clio prevailed in a competitive process, winning out over at least one other party, San Francisco AI startup Harvey. The deal is expected to close this year.
Mr. Newton declined to comment on how Clio, with US$300-million in annual recurring revenue, would finance the deal, nor did he provide any financial information about vLex. Clio does have debt facilities and deep-pocketed backers including New Enterprise Associates, Goldman Sachs Asset Management, TCV, JMI Equity and T. Rowe Price Associates, Inc.
Until now, Clio has sold what it calls an operating system for law firms. Its cloud-based platform is used by lawyers to manage their practices, including scheduling, bookkeeping, accounting, billing, client onboarding, document and case file management and advertising.
The profitable company is one of more than 70 private Canadian tech enterprises that have surpassed US$100-million in annual revenue, and a likely candidate to go public when markets warm up.
Last year Clio did a US$900-million secondary financing that saw NEA buy out employees and early investors in a deal larger than most Canadian initial public offerings.
During its first 17 years Clio focused on small to medium-sized law practices. Then in March it bought Manchester, U.K.-based Sliced Bread Ltd., whose Sharedo product targets larger, global law firms. The deal doubled Clio's potential market size. More than 200,000 lawyers now use Clio's practice management products.
vLex is a different business. The 350-person company, founded in 2000 by brothers Lluís and Angel Faus, maintains a global law library of one-billion-plus legal documents. vLex focused outside the U.S. until 2023, a year after its sale to Oakley, when it merged with Washington, D.C.-based Fastcase, giving it access to more than one million lawyers in the world's largest economy.
At the same time, vLex was developing a generative AI-based virtual assistant known as Vincent for legal professionals to automatically read cases, create research memos, build arguments, flag potential legal issues, cite authorities and draft documents.
Thomson Reuters and LexisNexis have created similar tools while also building in features to prevent a common problem with generative AI: its propensity to make up answers. Those so-called hallucinations have led to embarrassment for lawyers when they filed documents in court citing fictional cases conjured up by AI.
Nonetheless, lawyers are rapidly adopting AI tools and buying vLex 'establishes for Clio one of the most important strategic advantages in the age of AI, which is a durable data moat,' given the acquired company's vast law library, Mr. Newton said. He said Vincent, which is used by thousands of lawyers, 'enables for fully hallucination-free AI where citations are grounded in case law and lawyers can rest easy that' what it produces is trustworthy.
Vincent is still a nascent business with revenues that are 'not that relevant,' Mr. Newton said. He described Clio's investment as 'a venture bet. It's this extremely early but extremely promising and rapidly growing AI capability and business they're building that we acquired here.'
Clio was advised by Goldman Sachs and law firms Osler, Hoskin & Harcourt LLP, Wilson Sonsini Goodrich & Rosati and Gowling WLG. vLex used J.P. Morgan as its financial advisor.
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