How energy and mining firms are using data rooms to drive growth

Jun 15, 2011 - by Aaron Booth

With long term demand for energy and base metals increasing worldwide, energy and mining companies are looking for innovative ways to grow at a time of economic uncertainty.  From M&A transactions to attracting new capital, many firms are using data rooms to coordinate discussions with potential partners and investors across the world.

To better manage M&A deals and attract financing in innovative ways, leading energy and mining firms are using data rooms to share confidential documents like contract drafts, engineering drawings, and site photos.  A properly configured data room plays a key role in coordinating secure communication across internal and external stakeholders such as board members, financers, bidders, accountants, and lawyers. 

We asked our energy and mining clients to tell us about emerging trends in their industry, and how they are using virtual data rooms beyond the more traditional uses of M&A deals and corporate financing applications:

How Private Equity backed IPOs are attracting investors

May 20, 2011 - by Aaron Booth

The blockbuster LinkedIn IPO is proof of the pent-up demand from investors who have waited out the financial crisis to put their money down.   In the last few years, investors have watched several private equity backed offerings succeed in the market, and the growing attractiveness of the Private Equity market to investors has led to an increase in data room activity.  Private Equity firms are using Firmex for everything from fundraising efforts to ongoing financial reporting and divestments.

Studies show that several private equity sponsors emerged through the financial crisis, with solid portfolios, and the Ernst & Young LLP US IPO Pipeline study reported that of the 125 companies representing $18.4 billion in the IPO pipeline for Q1 2011, almost a third of these companies were backed by private equity and $9.6 billion - more than half of the Q1 pipeline - was represented by just three private-equity backed companies:

Virtual Data Rooms - Top 5 pricing considerations

Mar 17, 2011 - by Aaron Booth

When you’re procuring a virtual data room (VDR), time is of the essence and price is always a factor for you and your clients. During discussions with a potential VDR partner, make sure you know what is included in the price.  Knowing what to look for will ensure that you avoid surprise discussions around hidden fees, so you can concentrate your time on the deal - not the data room. Here are five things to clarify when obtaining a price for a virtual data room:

1. Price Certainty – Make sure the VDR price is fixed and there are no hidden fees for support, services or additional storage. Any fees for extending the length of the deal should also be discussed upfront, just in case the deal process take longer than expected, which tends to happen.
2. Page Count – I have always been perplexed by per page pricing. Who counts thousands of pages? What happens if pages are added or deleted as the deal progresses? Do you pay for blank pages, tables of contents, cover pages? Per page pricing is an outdated pricing model that has its origins in commercial printing.  Per page pricing is not suited for the digital age and should be avoided at all costs.
3. Storage – Secure storage doesn’t have to be expensive. Some vendors will flaunt the fact that they store your data on their own secure servers, but if you start asking questions, you’ll likely find that their features don’t measure up against an industry leader like SunGard. SunGard specializes in data storage and security for the world’s top financial institutions and SunGard’s systems account for and manage more than $25 trillion in investment assets and process more than five million trades a day.
4. Training and Consultation – Find out how much training is included for the price and the experience level of the trainers. You don’t want to end up paying extra fees because a system is hard to use and you want to trust the person who is helping you set-up your deal.
5. Support – Anything less than 24/7/365 is not good enough, and shouldn’t cost extra. Deals span time zones and people work after hours and on weekends. You and your clients need peace of mind that all of your users will be supported, anywhere and anytime.

At Firmex we pride ourselves on providing our clients with straightforward pricing and reliable service that ensures the client experience comes first.

Data Room Set-up: 5 Ways to Make Your Life Easier

Nov 2, 2010 - by Aaron Booth

We are nearing the end of the year and deals are heating up, so I thought it would be a good idea in this week’s post to point out a few things that everyone who needs to set-up a virtual data room can do to enhance the experience and make their life easier:

1. Get a Fixed Price – Charging extra for guest users that log-in and view files or for the number of pages in a document is a hassle. In most cases it will be impossible for you to even estimate these ranges when you are negotiating a price and the last thing you want is an incremental bill for your client at the end of the deal.
2. Access to Support – You would be surprised how many data room providers on the market do not offer 24/7/365 – even though they are offering the convenience of an online service. If someone on your team, a client, or even a buyer has questions at 3am on a Sunday morning, you need the peace of mind to know that everyone will get the help they need.
3. Prepare – Bells and whistles aside, a data room enables you to share documents with people. You can significantly reduce the time and effort it takes to go live with a data room if you collect and organize your documents and the names and email addresses of the participants ahead of time. This information will inevitably change over time, but the right virtual data room solution should make this easy to manage.
4. Maintain Control – Many data room providers will set up the data room for you, manage it and charge you and your client dearly for it. Choose a data room that is easy to use and one that provides free training and assistance with set-up so you do not have to rely on the vendor for minor changes going forward.
5. Test First – Human error is your biggest risk factor when setting up a data room. Leave yourself enough time so that you can log into the live environment, preview the set-up online, and verify security permissions before inviting outside users.

Can a virtual deal room save your M&A transaction? Perhaps…

Oct 19, 2010 - by Aaron Booth

I have a friend who works at a small investment bank. Their focus is sell side engagements with small to mid size companies in a select few industries. We were having coffee one morning, and I asked him to walk me through a typical sales cycle, from prospecting to closing a deal. He decided to walk me through an example that began with describing a long courtship with a client. It started with a cold call that led to a conference call and then a series of three face to face meetings. All of this unfolded over a period of 6 months. Finally, the owner of the business agreed to engage my friend’s firm to help him sell his business. He was nearing retirement age and there was no one in his family or at the business who was interested in buying him out. Once the engagement letter was signed, the firm began putting together an information memorandum and financial package to share with potential buyers. As part of their business they also actively seek out buyers and already had a short list for this target. The short list consisted of 6 potential buyers. Total cost of wooing this client including travel and entertainment was in the tens of thousands of dollars, which does not include anyone’s time.

Twelve CIMs were prepared and a collection of accompanying documents assembled. What happened next astonished me - my question was simply “how do you circulate the information to the buyers?” Understanding the business I am in, he smiled nervously – the answer it turns out was not so simple. With a little coaxing, I was able to get him to admit that they send the digital file of the CIM to a printer via email and wait 24 hours for the printer to create hard bound copies of the document. They also purchase 10 zip drives and copy all of the accompanying files onto them. The CIMs were sent next day via courier and the ZIP drives were also ready to be couriered to the buyers -showing interest in signing an LOI. Total cost for the glossy hard copies and the zip drives was approximately $800 with a wait time of about 72 hours for delivery.

Sharing Files beyond your Firewall – A Matter of Risk Management

Oct 4, 2010 - by Aaron Booth

Most firms that I talk to have invested in people and technology and implemented policies and procedures to ensure that their corporate data and/or their client’s data is protected within their organization. Secure servers, offsite back-up, VPNs, document management systems, strong passwords, data retention policies – everyone is familiar with these terms in the information age. What I find fascinating is the level of investment and attention to details that many firms employ internally, in contrast to how they share confidential or critical information externally.

I’ll give you an example. I was speaking to a group of managing partners at a large law firm recently, who were interested in using an online solution to share files outside of their organization with clients, other lawyers, and third parties for a variety of financial transactions. The files they wanted to share contained confidential and personal information and were to be collected from their clients and from the document management system. Internally, they had all the systems in place to protect this data – firewalls, restricted access, document check in - check out – it was all covered. When we started talking about using a SaaS application to share the documents outside of the firm, the idea was met with widespread skepticism. The concept of using a third party software application that was not owned by the firm or connected to their internal systems was not going to be acceptable. Understanding my challenge and having had this conversation before, I asked the question, “How do you send confidential documents that may have protected personal information to people outside of your organization today?” The answer was exactly what I had expected – Email using Outlook.

Corporations Choose SaaS Solutions for Secure Online File Sharing

Sep 16, 2010 - by Aaron Booth

In the past six months, we’ve noticed that corporations of various sizes across multiple industries have been turning to SaaS solutions to share large volumes of critical information beyond their office firewall.  More specifically energy, biotech, manufacturing, health care and pension fund sectors have been actively seeking a more secure way to share and collaborate internally and with external parties.  It appears that no matter what business you are in or what your businesses processes are, there is always a need to securely share large volumes of information easily and cost effectively.  Email, FAX and courier are not secure enough and continue to be cumbersome and prone to error.

Historically, sharing documents online in virtual data rooms have primarily been used for due diligence in M&A , fund raising, refinancing, and real estate transactions.  Corporations are now recognizing the value of sharing information online to complement or improve document intensive processes, streamlining real world business challenges such as RFPs, Engineering, Procurement and Construction compliance, financial reporting, audits, board communications or simply having an accessible repository of key legal documents.   Documents are often more secure online than stored on in-house computers, flash drives or distributed as attachments using email.  Using Firmex, clients organize and access literally millions of documents in a SAS 70 compliant environment with encryption transmissions, and fully segmented and secure databases with mission critical redundancy, which is often not the same environment that office computer storage provides.

Private Placements: Why not use a Virtual Data Room?

Jul 15, 2010 - by Aaron Booth

Recently, I have been talking to professionals that specialize in issuing private placements. A private placement is a funding round of securities that are issued to a select group of targeted, private investors. In my discussions, it has become apparent that there is an opportunity for professionals in this space to leverage the capabilities of a virtual data room, particularly if they manage more than one of these transactions annually.

The existing trend in managing the distribution of documents to investors is email, which is unsecure and unable to provide intelligence. There are multiple opportunities throughout the private placement process where a virtual data room can be used in place of email to provide a faster, more secure method of delivering documents while also unlocking valuable data points that can accelerate the transaction and improve the efficiency of locating qualified and accredited investors that want to participate. The following points demonstrate the opportunities at each stage of the Private Placement process:

Strategic Assessment: Financial professionals first must analyze a business in order to make recommendations on financing alternatives that may include PP. The documents that must be shared can be large in quantity and confidential. A virtual data room is an attractive alternative to email for collecting and sharing this information in an organized fashion while keeping the data safe.

Firmex Adopts Net Promoter Score for Client Satisfaction

Apr 15, 2010 - by Aaron Booth

In late 2008 we at Firmex were discussing strategy around enhancing our data room service for client satisfaction and planning for the future. We identified the need for a benchmark to measure our success in delivering our service to our clients. We also needed a better understanding of how clients feel about what we deliver and what they need in the future to enhance their experience.

In my time at GE, we used the Net Promoter Score (NPS). It proved to be a valuable tool for measuring customer satisfaction and loyalty, while obtaining valuable feedback direct from clients. It seemed like a logical choice for what we needed to accomplish.

NPS is a simple but effective measure of customer loyalty used by many leading companies including Apple, GE, IBM, American Express – this list goes on.  The NPS approach is to ask your customers two simple questions:

1. Are you willing to recommend us to a colleague, client, or business partner and
2. Please tell us why.

Digital Rights Management for Secure Document Sharing

Apr 8, 2010 - by Aaron Booth

Digital Rights Management, commonly known as DRM, refers to the ability to protect various types of electronic media.   In recent years, DRM technology has become topical because of its role in protecting digital music and movies that make their way online. However, DRM also plays an important role in the financial transaction world offering security to those who share documents online in Virtual Data Rooms.

Most documents that are uploaded to Virtual Data Rooms are scanned into a PDF format, limiting others’ abilities to change files once uploaded and typically reducing file size. Once in PDF format, the documents are readable by a number of different PDF viewing programs, such as the Adobe Reader.

Many “read” programs provide sharing documents with options for applying DRM protection; once implemented, restriction is based on the level of protection applied. The most commonly used DRM protection settings in Virtual Deal Rooms are any combination of blocking print screen, disabling the printing function, prohibiting saving, or adding a dynamic watermark to each page of a document. If DRM is applied to the document, the document is only readable if the user is on the internet.