Thomson Reuters has entered into a definitive agreement to acquire Casetext, a Y Combinator-backed legal tech startup.
The deal, valued at $650 million in cash, is expected to close in the second half of 2023, subject to regulatory approvals and customary closing conditions.
“The acquisition of Casetext is another step in our ‘build, partner and buy’ strategy to bring generative AI solutions to our customers,” Thomson Reuters CEO Steve Hasker said in a canned statement. “We believe that Casetext will accelerate and expand our market potential for these offerings — revolutionizing the way professionals work, and the work they do.”
Founded in 2013, Casetext, which TechCrunch has covered numerous times throughout its history, initially focused on creating both a community for attorneys to share knowledge and a service to give users free access to legal texts annotated by lawyers. But the company later pivoted, embracing AI and ML to build automated workflows and tools for legal teams.
Casetext’s flagship product is CoCounsel, which taps AI to review documents, help with legal research memos, prepare depositions and analyze contracts. Casetext was one of the few granted early access to OpenAI’s GPT-4 language model, which serves as the infrastructural backend for CoCounsel.
According to a press release, Casetext — which has 104 employees — has a customer base exceeding 10,000 laws firms and corporate legal departments. Leading up to the acquisition, the company raised over $64 million from Union Square Ventures and others.
“For the last ten years, we have harnessed the power of AI to build products that elevate the practice of law and enable attorneys to serve more people’s legal needs, with the ultimate goal of increasing access to justice,” Casetext CEO Jake Heller said in a statement. “Joining Thomson Reuters is an incredible opportunity to advance our mission and the field of generative AI solutions exponentially, not only for lawyers but across professions, ensuring this revolutionary technology can benefit as many people as possible.”
For Thomson Reuters, the acquisition is a part of a long-term strategy to embed generative AI into its major business verticals — legal, tax, accounting and news. The company recently announced that it plans to spend some $100 million a year on AI and incorporate generative AI into its products in the second half of this year, and to set aside $10 billion for mergers and acquisitions — many AI-focused — from now until 2025.
Where it concerns Reuters’ legal business, generative AI seems like a wise place to invest if surveys are to be believed. A Reuters poll — which obviously has to be taken with a grain of salt, given the source — published in 2023 found that 82% of legal professionals believe generative AI can be readily applied to legal work. A slightly smaller majority, 51%, said that generative AI should be applied to legal work.
Some believe that generative AI technologies could add trillions in value to the global economy. Others are more skeptical, pointing to overhype and the potential for job loss. In any case, VCs and corporations alike are pouring an immense amount of cash into the sector, with the market for generative AI forecast to generate $36 billion in revenue by 2028.