Online Deal Rooms Trends

Jun 14, 2006 - by Joel Lessem

The emergence of online due diligence deal rooms is growing. From a few hundred deals in 2002 to an estimated 6000 in 2006. The two leaders (Intralinks, Datasite) are now being beset with smaller, cheaper alternatives as the market matures. These smaller virtual data rooms are sold through financial printers, who can digitize hard copy diligence documentation and post it online for accountants, lawyers and relevant parties to review.

On the other side of the spectrum are the legal software companies companies (Hummingbird, Interwoven) that have launched "enterprise collaboration tools" that handle due diligence and the actual collaboration over drafting closing documents. Downside is these enterprise tools tend to be generic for many different legal matters and they are not super intuitive for managing transactions specifically. They also require an investment in implementation and IT resources.

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.

Data Room Performance Improvements at Firmex: An Overview

Feb 25, 2010 - by Marcel Meyer

Because data room performance is important to our clients, we recently released the first wave of our new software architecture to address the growing demands of our customers.

For the past few years, our customers have primarily used our data rooms for M&A deals which are usually made up of around 300 folders containing 5000 documents. However, as our clients are adopting electronic deal rooms for other uses, such as litigation and clinical studies, we decided to adapt to these new requirements. Some of these virtual data rooms might have over 80,000 folders containing more than 100,000 documents.

We’re excited to roll out our new architecture that supports sub second data retrieval, even on these large scale deals.  These improvements represent considerable time and money savings for our clients working with multiple small to large transactions. The litigation and life sciences verticals will greatly benefit from these data room improvements.

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.

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.

How Safe are the Documents in your Office?

Apr 29, 2010 - by Joel Lessem

Firmex is in the business of providing M&A advisors, lawyers and corporate executive staff a secure online data room for sharing critical operational, legal and financial documents with 3^rd parties.  Not surprisingly, as the company's CEO, I run into resistance from senior partners and executives about putting critical and highly confidential company information on the Internet.   They are worried that it’s “not safe.”

 Meanwhile around the advisors’ offices are file folders of confidential documents on shelves, on chairs, organized in piles on the floor!  Somehow they are ‘safer’ scattered around an unlocked office.  Recently, a group of lawyers were convicted for trading insider information which was gleaned from picking through other lawyers’ client documents. Below is an excerpt from the story:

First at Sullivan & Cromwell in the United States and later at Dorsey & Whitney in Toronto, Mr. Cornblum used a practice he called "spelunking" to gather information, which involved showing up at work in the early hours of the morning and wandering the halls and offices of other lawyers in search of documents inadvertently left on desks and in photocopiers.  [Read More]

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.

Life Sciences: Highly Confidential Intellectual Property and Virtual Data Rooms

May 13, 2010 - by Joel Lessem

Many Firmex clients are Life Sciences firms developing new therapeutic medicines.  What amazes me about this industry is the time horizon of 15+ years to take a drug from idea to market, costing millions, even billions of dollars. There are 3000-4000 early-stage research-driven firms funded by public markets or venture-capital that take on the technology risk of trying to develop new drug pipeline.

The process to take a new drug through pre-clinical and clinical trials is extensive. Through the process, Life Sciences firms develop new chemical molecules.  The structure of these molecules and their development are potentially worth astronomical amounts of money.  Therefore, the exhaustive trials have to be guarded and kept highly confidential.

In the clinical development process, elements of the firm’s intellectual property (IP) are often shared with scientific consultants, investors and ethics committees from clinical trial sites or jurisdictions.  Additionally, the IP is often reviewed by larger pharmaceutical firms seeking to either license, co-develop or buy the IP from the research based firms.

The Green Efficiency Advantage: Virtual Data Rooms and Developing Renewable Energy Infrastructure

May 20, 2010 - by Joel Lessem

Over the last year, Firmex has been signing a significant number of renewable energy developers -  in particular solar and wind energy. As the health of the environment continues to be a growing global issue, demand for renewable energy is accelerating. Solar energy has grown at 30% per annum over the past 15 years while wind power grew close to 32% in 2009.  In 2008 some $155 Billion was invested in renewable energy up fourfold from 2004.  Investment fell 40% in 2009 due to the economic crisis though experts expect that to rebound. As Firmex, virtual data room technology, becomes more cost-effective and easy to use it is becoming increasingly useful to the renewable energy industry.

 Renewable Energy Companies are using Virtual data rooms in the following areas:

1. Finance: Renewable energy plays are capital intensive.  Raising capital for development infrastructure is a key use of Firmex.
2. Engineering, Procurement and Construction Bids (EPC Bids). Developers will contract out the EPC of various sites.   Developers request bids from engineering firms, material suppliers and construction firms on new infrastructure.  Sharing confidential documents with various parties is done through the virtual data room.
3. Acquisition and Sales of renewable energy sites. Typically they are in various stages of development and are non-operating. These assets are bought and sold between developers.  Buyers review documents in the virtual data room.
4. Acquisition of Renewable Energy Credits or RECs. Owners of RECs can claim to have purchased renewable energy.  Many US states have a requirement for companies to purchase or supply a certain amount of renewable energy.  The certificates can be traded to meet these requirements or to meet an organization’s carbon footprint goals.