Economic turbulence, M&A driving need for legal and corporate outsourcing in 2023

M&A will require more attention in 2023

In the coming year, companies and investors seeking liquidity will be more interested in mergers and acquisitions due to the volatility (and sometimes freeze) in equity markets.

As a result, the demand for expert legal work will remain high. Indeed, chief legal officers anticipate that major transactions, such as M&A and corporate spinoffs, will require the most time and resources in 2023.

The volume of post-closing M&A disputes is also reported to be increasing with inflation and the threat of recession. It’s reported that buyers may seek to recoup valuation gaps as deals underperform in today’s challenging marketplace. Disputes could also rise with any increase in the use of earnout structures. Other threats include cybersecurity risk, data privacy, geo-political issues, and environmental, social, and governance (ESG) issues.

Activities being outsourced

When asked which activities are outsourced and plans for future outsourcing over the next year, respondents to the CT Corporation 2023 Legal Outsourcing Study selected the following as the four top areas:

• Regulatory risk and compliance services: 27% outsource and 27% plan to
• Entity management: 26% currently outsource, 18% plan to
• Due diligence on pending M&A: 27% currently outsource, 18% plan to
• Business license management and compliance: 21% currently outsource, 15% plan to

Who is driving outsourcing decisions?

According to CT Corporation’s 2023 Legal Outsourcing Study, decisions regarding the outsourcing of legal work are primarily designated to one of two groups:

• Legal operations professionals (63%)
• In-house counsel/corporate compliance executives (54%)

Roughly only a third of organizations utilize procurement professionals to participate in this process.

How are decisions being made about what is being outsourced and to whom?

As legal teams decide which processes they will outsource, study participants cited budget and cost, experience, and security as extremely important.

Perhaps unsurprisingly, the same factors were extremely important in selecting which providers to outsource to. This indicates that these decisions are made concurrently, implying that trusted providers are driving buyers to outsource certain activities, rather than buyers making that decision independently first, followed by a selection of the most appropriate vendor. 

Conclusion

As the business and regulatory environment grows increasingly complex and costs and workloads rise, corporate legal departments must think carefully about when and what activities to outsource.

Outsourcing brings many benefits. It improves capacity without increasing overhead, helping to differentiate the legal department. By delegating time-consuming and mundane (but highly critical) tasks to the right partner, teams can attend to more meaningful work and dedicate top-notch service to clients and generate stronger performance.

To learn more about how CT Corporation can help you manage your entity information needs, contact a CT Corporation Service Representative or call (844) 878-1800.