Standard data room index to speed up M&A deals

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In the fast-changing transaction market, those who turn a blind eye to technology will miss the train of excellence

Investing in virtual data rooms that provide additional services such as indexes will seal the competitive advantage of the smartest deal-makers over the majority. The issue of technology goes far beyond the aspiration to innovation; it is about survival in a tough market. Deal-makers need to achieve more with less and for this they need better technology.

image_supp_01Consultants, experts and other professionals involved in transactions must compromise with several points of tension: pressures aimed at reducing time and costs and the slow decrease of rewarding remunerations. Still, a deal requires many hours of work per week. Most of this time will be spent in a data room.

“The uploading of large amounts of data to the data room often results in a clumsy process,” says corporate finance expert Jan Hoffmeister. “Everybody starts with good intentions, but at some point the data room will look messy.”

In addition, some data rooms present a real data dump, preventing those involved from being able to work properly. Many experts’ testimonies of failed deals were because of bad, unsystematic organisation or disclosure of the information.

A transaction implies the co-operation of hundreds or even thousands of parties communicating with each other. To this extent, the compelling step towards a trade is the setting of a standard. The latter benefits not only the vendor and the buyer, but it also helps consultants that practise by the billable hour.

Working according to a shared procedure on a single deal allows all participants to gain an edge over the competition by maximising efforts and diversifying activities, and therefore increasing sources of potential revenue.

The core of due diligence is the exchange of confidential documents, wherein the contribution of technology has a compelling role. To this extent, a fast and efficient virtual data room is crucial, mostly in the context of rising transaction volume such as we are witnessing this year. Data room providers that offer a standard transaction index will ensure deals speed up considerably.

Although the M&A market operates in different sectors, the range of documents needed for a transaction remains more or less the same.
By having a list of requirements at hand before starting a deal, those involved will save a lot of time, mostly when the index can be easily dragged and dropped from the desktop to the data room.

Due diligence will generally include the following documents:
Company and legal structure
Trade register excerpts
Licences, approvals, permits and certificates
Shareholders’ agreement
Corporate history
Articles of incorporation
By-laws
Lists of all current shareholders
List of all officers and directors
Overview of intellectual property and trademarks
Standard customer contracts
List of the company’s 20 biggest customers or channels
Top three supplier agreements
List and details of employees
Contracts of key employees
Standard working contracts
CVs of key personnel
List of all lease agreements
Guarantees given by the company
Financing agreements
List and details of insurance policies
Audited financial statements
Current management reporting
Current business plan
Tax accounts.

Having these documents organised and precisely indexed is a clear edge. Obviously, the nature of the information will vary according to the particular deal. Nevertheless, starting from the basics will prevent deal-makers from losing control of the data room and of the deal.

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