Virtual Data Room Activity a Leading Indicator?

Jun 29, 2009 - by Aaron Booth

Over 250 financial and legal advisory firms are using their own, privately branded Firmex data rooms. Firmex-powered deal activity was up 255% in Q1 2009 versus a 10% decline in Q4 2008.  According to Firmex’s M&A advisory clients, the increase is a result of sellers bringing deals back to market. The majority of the increase occurred late in Q1 2009, and the trend is continuing into Q2 2009.

Firmex advisory clients are busier with more deals, and the deals are lasting longer and appear to be more challenging to close. Tight credit conditions and lower valuations are most likely key factors. Over time, the number of active deals that firms are managing in this environment is increasing and deals are being reviewed by many potential buyers. This puts pressure on deal makers, as deal cycles are long and unpredictable.

Firmex helps to alleviate this pressure by allowing firms to manage an unlimited number of deals indefinitely in their virtual data room. Deals can be started, stalled, and reopened as needed, in a fast, easy and efficient manner. In addition to securely sharing due diligence information, Firmex is also being used to organize the distribution and storage of NDAs, Information Memorandum, and LOIs. This flexibility and deal lifecycle management enhances M&A advisory firm’s ability to react quickly for clients.  This is especially important when deals get hot and being “deal ready” will help to close deals faster and mitigate risk of the deal stalling.

Virtual Data Rooms: Modernizing the Workspace

May 12, 2010 - by David W. Hammer

Most of Firmex’s clients are now using the internet to distribute seller’s books or confidential information memorandums when managing a sell-side M&A transaction. However, there are firms that are continuing to create physical books, which can range from 50 to 200 pages. These books are typically distributed to a large number of potential buyers, particularly if an advisory firm routinely markets transactions to a database of private equity firms.

The recent advent of the kindle, the iPad and other paper eliminating devices serves as an interesting marker of just how archaic a practice it is to produce physical books for an industry as fast paced as M&A.  Producing that many physical books is outdated, expensive and time consuming.

The cost (not to mention the carbon footprint expenditure) to produce, print, bind and ship one book can be upwards of $100 and can take anywhere from 24 to 48 hours to reach its destination. If you are marketing a transaction to 40 potential buyers with a seller who wants to close quickly, this lag time can significantly affect  profit on the transaction (or the seller’s cost) and the transaction timeline.

Want Liquidity? Consider Selling a Piece of Your Company to an ESOP

Jul 1, 2010 - by William Stewart

While the M&A market continues to recover, business owners are utilizing Employee Stock Ownership Plans (“ESOPs”) to satisfy the need to convert some of their illiquid privately held company stock into cash and other liquid investments.  The ESOP is attractive due to significant tax savings to the owner and company, flexible deal structures and speed with which a transaction can be completed.  With higher capital gains taxes looming in 2011, now is a great time to evaluate this liquidity strategy.

The flexibility of a partial sale to an ESOP provides business owners the ability to:

• Sell a portion of the business
• Save taxes; both personal and corporate
• Motivate and retain employees
• Retain upside in the business

Consider John Doe, a 50 year old owner of an electrical distribution company in the southeastern United States.  John started the business 15 year ago, has achieved fantastic growth but a recent fall off in the business has John interested in exiting the business completely at age 60 (10 years from now).  However, the stresses on his business and decrease in his net worth have him concerned about his personal liquidity and financial security today.

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.

State of the M&A Markets - First Quarter 2012

May 1, 2012 - by Michael Poole

We often highlight articles from our customers that would be interesting and relevant to the Firmex community. Enjoy this in-depth report by Michael Poole of PCE Investment Banking, on the state of the M&A markets for Q1 2012.