Virtual Data Rooms: Modernizing the Workspace

Virtual Data Rooms: Modernizing the Workspace

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a practice it is to produce physical books for an industry as fast paced as M&A.  Producing that many physical books is outdated, expensive and time consuming.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.

Using a virtual data room to manage this process can accelerate the transaction process  from the beginning, help manage costs and provide security measures that often fall through the cracks. An on-demand, unlimited use, virtual deal room can instantly create a new project for all sell side engagements, upload the seller’s book or CIM in minutes and, following execution of the appropriate confidentiality agreements, instantly invite dozens or hundreds of potential buyers (including a long list of PE firms) to review the information.

Furthermore, a virtual data room will provide detailed reporting on exactly who is viewing documents so that the seller will know who has shown a genuine interest in the deal. This process is less expensive, more environmentally friendly and all around more effective than creating and distributing physical books and it provides greater security and transparency to those that have taken steps toward modernity with the use of email.

Those who have tried to use e-mail as an effective tool for disseminating books and due diligence information quickly realize that:

  1. the size of the attached files will often prevent the e-mail from transmitting
  2. if the e-mail does transmit, you can’t send very many of them before your recipient complains that his Outlook hascrashed due to size overage.

Simply put: the virtual data room is a superior alternative.