Why Associates Spend 60 Hours on Material Contracts (and How to Reclaim It)

Material contracts review is the process of identifying and analyzing the target company's most significant agreements during M&A due diligence. These are the contracts that define the target's key commercial relationships, create material obligations, or contain provisions that could affect the transaction. For a mid-market deal, the material contract set typically includes 40-80 agreements extracted from a larger data room of 200-500 documents.

An experienced associate spends approximately 60 hours reviewing a typical set of material contracts. That number is remarkably consistent across practice groups and firm sizes, because the work follows a predictable pattern with four distinct phases, each consuming a proportional share of the total time.

Phase 1: Reading (30 Hours)

The reading phase consumes half the total review time. Associates read each material contract from beginning to end, developing an understanding of the agreement's structure, parties, and key terms before they can identify relevant provisions.

A typical material contract is 25-40 pages. At 45 minutes per contract for an initial read-through, reviewing 40 contracts takes roughly 30 hours. This assumes focused reading with no interruptions, which is optimistic.

The fundamental inefficiency of the reading phase is its coverage ratio. A 35-page master services agreement might contain 10-15 provisions relevant to the deal: change of control, assignment restrictions, termination rights, indemnification terms, confidentiality obligations, and limitation of liability. That is roughly 3-5 pages of relevant content embedded in 30 pages of standard boilerplate.

Associates read 100% of the document to find the 10-15% that matters. They cannot skip ahead because they do not know where the relevant provisions are until they read the full agreement. A change of control provision might appear in Section 14 of one agreement and Section 8 of another. Defined terms in Section 1 may qualify provisions throughout the document.

This is precisely the problem that clause-level extraction solves. Instead of reading every page to find relevant provisions, a structured extraction system identifies and extracts deal-relevant provisions automatically, presenting attorneys with the 10-15% that requires their judgment.

Phase 2: Flagging (15 Hours)

The flagging phase is where legal judgment enters the workflow. Having read each agreement, the associate identifies provisions that are non-standard, potentially problematic, or relevant to the deal structure.

This requires understanding what "standard" looks like for each contract type. A 12-month non-compete in an employment agreement is standard. A 36-month non-compete is notable. A non-compete that survives a change of control without a carve-out is a red flag.

Flagging also requires understanding the deal context. An assignment restriction in a customer agreement matters differently depending on whether the deal is structured as a stock purchase (where assignment may not be triggered) or an asset purchase (where it likely is). An uncapped indemnification in a $50,000 annual vendor agreement is less material than the same clause in a $5 million customer relationship.

This phase requires the associate's M&A knowledge and professional judgment. It is the part of the review that cannot be fully automated, though it can be significantly accelerated when the system surfaces non-standard terms and provides deal-context risk calibration.

Phase 3: Summarizing (10 Hours)

The summarization phase converts the associate's reading and flagging into structured findings. For each material contract, the associate writes a summary covering: parties, effective date, term, key commercial terms, material obligations, risk-relevant provisions, and any non-standard or unusual terms.

This work follows a formulaic pattern. The associate has already identified the relevant provisions during reading and flagging. Summarization is the process of translating mental notes into written findings in a consistent format.

The mechanical nature of summarization makes it one of the clearest candidates for automation. The associate already knows what the provision says. The task is to restate it in the format the diligence memo requires. That is information reformatting, not legal analysis.

When extraction is structured from the start, summarization becomes unnecessary as a separate step. The extracted provisions are already in a structured format that maps directly to the memo template. The data flows from extraction to deliverable without a manual transcription step.

Phase 4: Formatting (5 Hours)

The formatting phase covers the final assembly of findings into deliverables: populating diligence memo templates, creating disclosure schedule entries, formatting exception lists, and organizing exhibits. This is pure administrative work.

Despite being the smallest time block, formatting introduces errors. Transcribing a dollar amount from a contract summary into a disclosure schedule creates an opportunity for typos. Reformatting a provision description from memo format to schedule format requires rewriting, which can introduce inaccuracies.

Structured extraction eliminates formatting as a separate phase entirely. When provision data is captured in a structured schema from the beginning, it populates any deliverable template directly without manual transcription.

Where Judgment Actually Lives

Across the 60-hour workflow, genuine legal judgment concentrates in the flagging phase (15 hours) and in specific moments within reading where the associate recognizes something unusual. That is roughly 15-20 hours, or 25-33% of total time.

The remaining 40-45 hours (67-75%) is information processing: reading to locate provisions, extracting specific terms, reformatting findings, and assembling deliverables. This work requires legal training to do correctly, but it follows predictable patterns that a well-designed system can execute with higher accuracy than manual review, provided every finding links to its source.

Reclaiming the 75%

When the mechanical 75% is handled by structured extraction, the associate's 60-hour engagement transforms.

Reading: Instead of reading 40 contracts end-to-end, the associate reviews pre-extracted provisions organized by type, spending 5-8 hours reviewing findings rather than 30 hours reading. Each finding links to the source for verification.

Flagging: With provisions already extracted and organized, the associate can focus on identifying non-standard terms and risk-relevant patterns, spending 10-12 hours on analytical review rather than 15 hours that include provision hunting.

Summarizing and formatting: Eliminated as separate phases. Structured extraction produces findings in the format needed for deliverables.

Total: 15-20 hours. Almost entirely analytical work. The associate reviews findings, exercises judgment on risk and materiality, and prepares the analytical sections of the diligence report. The cost reduction is significant, but the quality improvement matters more: associates spend their entire engagement on the work that actually protects the client.

For law firms managing multiple concurrent transactions, reclaiming 40 hours per deal across 15-20 deals per year recovers 600-800 hours of associate capacity annually, the equivalent of adding a full-time associate without the recruiting cost.

---