The New Firmex Blog is Live!

Jan 28, 2010 - by Joel Lessem

Welcome to the new and improved Firmex Blog, an online space to discuss about secure document exchange and collaboration, virtual data room technology and its applications, M&A trends and news, secure extranets, and many other related topics.Aside from the new look, new content and features, there are some specific goals we would like to achieve with this blog.

• As one of the leaders in our industry, we want to contribute to the ongoing conversation on topics related to secure document collaboration and virtual data room environments.

• Deliver value added content, articles, news and case studies to corporations, investment banks, law firms  and any organization looking to securely organize and exchange confidential documents online.

• To answer your questions and concerns on secure online information exchange and collaboration.  If you are conducting a due diligence process, reviewing transaction drafts, closing deals, running audits., providing document libraries for clients  or across organizations  as part of a corporate initiative, we want to hear from you.

• We survey 1000s of users every year. We are interested in hearing your comments, questions, inquiries and product ideas as we continuously expand the uses and functions of our technology.

• However, above all, we want to listen to you, our reader. Come and help us shape the industry and deliver even better value to organizations around the world.

Once again, welcome and thanks for dropping by!

Understanding Virtual Data Rooms

Feb 4, 2010 - by Joel Lessem

A virtual data room (“deal room” or “data room”) is a secure web-based document repository generally used for buyers or investors to perform their due diligence on M&A transactions or investment. It is however an increasing trend in top legal firms to use virtual document rooms to support business and commercial litigation processes for external collaboration and file sharing.

The virtual data room replaced the physical data room where binders of documents were stored in a secure “monitored data room” and potential buyers or investors would confidentially book time in the room.  Multiple investors and buyers to simultaneously log into the virtual data room website to review documents anonymous to each other.  Virtual data roomtechnology can prevent visitors from saving or printing certain documents and limit viewing time if required.   Virtual deal rooms are easy to set-up with high-powered tools that can upload or download 100s if not 1000s of documents in a matter of minutes or a couple of hours directly from a single local source or multiple locations.

Electronic data rooms fully mimic the physical data room but without the required travel or the inconvenience of booking sequential visits.  A shorter time frame for reviewing diligence information and reduces risk of a deal going off track and potentially can increase bid values with a greater sense of urgency.

In 2001 several hundred M&A transactions were conducted on virtual data rooms.  By 2008 the vast majority of M&A transactions (in the tens of thousands), ran their comprehensive due diligence process in such an online workspace.  This has been aided the growth of lower cost and highly secure virtual data room providers.

Why Is Unlimited Use of Virtual Data Rooms so Beneficial?

Feb 11, 2010 - by Joel Lessem

It has always puzzled me as to why virtual data room providers charge per data room or per page or total number of users.  How can any company running a deal know exactly how many pages of documents they will have? Or how many users are going to access the deal room? 

Therefore, a buyer is unable to predict the final cost of the VDR. If they misjudge the amount of due diligence documentations or users, they can get stuck with a hefty bill. This type of “multi-line item” quoting is not designed with the customer in mind.

The other item I never understood is why the limitation on the number of deal rooms?  It’s not uncommon to have multiple data rooms for a single project.  More so, it’s the ability to start getting “deal ready” and exchanging documents early on in the mandate. Unlimited use also broadens the scope of use.

Alternatives to Expensive and Time-Consuming Air Travel

Feb 23, 2010 - by Nicole Black

Let’s face it, these days, business air travel is a costly proposition—it’s expensive and takes up valuable time.

And, travel time is only increasing due to the recent attempted terror attack, as widely reported in the press.  For example, as explained in a recent Montreal Gazette article:

Massive lines, flight delays and cancellations greeted Canadian passengers traveling to the United States on Sunday as new security measures moved into a second day and another suspicious incident was reported on board a U.S. flight, increasing tensions.

Weather delays aren’t helping matters either, now that we’re in the midst of a long, cold winter, as detailed in this Chicago Sun Times article:

A messy winter storm — which could bring up to a foot of snow…— caused major headaches for travelers…prompting more than 500 flight cancellations at  both city airports.

One way businesses can avoid the time suck of costly air travel is to utilize innovative alternatives to face-to-face business meetings, such as video conferencing, screen sharing and online document sharing.

Virtual Data Rooms: Unlimited-Use Closes Deals Fast

Mar 4, 2010 - by Joel Lessem

In any deal, time is risk.  The longer it takes to close a deal, the greater the potential for the transaction to get derailed.  Being prepared ahead of time is one way to avoid time delays and risk.

Firmex’s unlimited use virtual data room broadens the range of use investment banks have for their data rooms exponentially: they can collect information to develop and circulate CIMs when marketing transactions and have their client prepare diligence information early. When the LOI is signed, diligence documentation is available and valuable deal momentum is maintained.

Shopping for virtual data rooms at the 11^th hour adds unnecessary risk to maintaining momentum and effectually closing the deal. In some cases our clients may be running multiple transactions as part of one deal (eg.debt refinancing, 3^rd party valuations, selling certain assets etc.). With Firmex, clients can startup additional data rooms to coordinate and manage related transactions at no additional cost or delay.

Firmex charges a flat subscription fee for unlimited data rooms at the same cost as a single data room from an alternative data room provider. The M&A advisory firm can set up and maintain control over all their active mandates, have cost certainty for their clients, and get deals organized ahead of time to avoid delays in the M&A process.

Virtual Data Rooms Offer a Secure Alternative to Email

Mar 9, 2010 - by Nicole Black

As discussed last week, the unencrypted email systems used by most law firms are inherently insecure and place confidential client data at risk.

However, there are secure alternatives to email, using cloud computing products, like Firmex online document workspace, that incorporate some form of encrypted client communication into their platforms. These cloud computing platforms provide lawyers with a ready-made solution to the problem of unencrypted, insecure email.

There are a number of products available that allow attorneys to securely exchange large volumes of confidential documents and information with opposing counsel, clients and others. For example, law firms can use secure virtual data rooms such as those provided by Firmex,  to collaborate and communicate with other users, manage online due diligence, exchange closing drafts, create digital record books, share litigation documents, and secure client access to important files.

Gatekeeping the Virtual Data Room

Mar 18, 2010 - by Jim Rench

The use of a virtual deal room (“VDR”) has become commonplace in modern merger and acquisition practice, replacing the formerly prevalent document room.  The advantages of a VDR include reduced cost; reduced security concerns; accessibility to multiple parties simultaneously and 24/7; reduction in actual deal time; and an electronic data trail establishing who saw what and when.

An important consideration in the deployment of a VDR is the question of who will serve as the gatekeeper to the VDR, determining what information is appropriate for posting and what level of security and access to assign to such information.

In our opinion, the Seller’s legal counsel is the appropriate gatekeeper to the VDR. Personnel of the seller, while more familiar with the information, are typically the least familiar with the deal process and potential legal issues posed by the information.  They are also the least likely to have the time, with the additional stress of gathering and producing due diligence information already layered on top of their routine daily duties.  And while deal intermediaries are certainly the most familiar with the deal-making process, they are not legal counsel and necessarily familiar with the legal issues posed by the information.

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.

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.

Firmex Offers to Help Arrangers of Structured Debt to Comply with SEC Rule 240 17g-5

Apr 21, 2010 - by Joel Lessem

A common complaint by participants in the recent credit collapse is they did not understand what they were buying, rating or selling. Part of the reason for this lack of clarity is that the structured debt products CDO (Collateralized Debt Obligations) and related derivates products were themselves convoluted, consisting of large volumes of mortgages and other forms of debt which were aggregated and sliced into tranches with varying risk profiles.

However, the developers of the CDOs presented mathematical calculations that argued they were fairly risk free.  The issuer calculations impressed rating agencies enough to grant many CDOs Triple-A Ratings (highest rating) and as a result investors bought.  Unfortunately, the mathematical assumptions were flawed and most of these products were based on loans made to borrowers who had no means to repay and the CDO values soon collapsed.

In order to mitigate a recurrence of this financial collapse the SEC wants to bring greater transparency to the rating of structured debt products.  The SEC has asked arrangers of these products (generally large investment banks) to retain all information submitted to rating agencies in a password protected website. Here is a summary of the new requirements written by TD Waterhouse: https://research.tdwaterhouse.ca/research/public/Markets/NewsArticle/1314-WLB1445-1