How our customers use data rooms
A blog post by Monica Tang, Business Development Manager at Admincontrol
One trend we have observed at Admincontrol in recent years is that companies of all sizes have started to use of data rooms when preparing a sale, and especially when it is time to perform a due diligence. Previously, this would typically be the case only for the largest transactions, but now even small companies have come to understand the importance of security and control around transactions.
In 2018, we supplied and managed 922 data rooms – 200 more than in the previous year. There was considerable growth in all the Nordic countries and the UK. How many of these processes that concluded with a successful transaction we cannot say with precision, but it is certain that the value of the companies sold is in the billions.
How long do the companies spend on preparation before inviting potential purchasers into the data room? What is the average lifetime of a data room and which of the available functions do the users take advantage of? The answers are here in this blog post.
Many roles in a data room
For a start, the figures show that our customers spend on average 27 days in preparation before launching a data room. To get ahead of the game with early preparations, our new Preparation portal function can help kickstart the process.
One interesting observation is that 14.9 per cent of customers who set up a data room in 2018 never opened the portal up to potential purchasers. There may be many and complex reasons for this – ranging from the early withdrawal of the buyer to unexpected negative developments in the process.
Many involved in the data room
At Admincontrol, we are used to customers being in a hurry and wanting a data room to be available as quickly as possible. The vast majority of data rooms that we supply are set up within a few hours of receiving a signed agreement. We have dedicated Client Managers to assist with the start-up procedure and who are on-hand throughout the process.
Once the data room has been created, we often seen the involvement of many different parties in the transactions. On average, a total of 28 people are involved in the data room – 8 on the seller’s side and 20 on the buyer’s side. There are usually three roles in the data room (a seller and two interested parties) and the average contents total 935 MB or 8312 pages.
Q&A function is important
Many of our customers utilise the Q&A function – 63 per cent, in fact – and, on average, around 118 supplementary questions are submitted over the course of the due diligence. A Q&A module provides a good overview of questions and answers concerning the documentation.
Questions and answers can be added underway and the module has options for delegating, sorting and structuring questions. If these are used, a so-called gatekeeper is assigned to quality-assure questions and answers before they are published.
The data room provides a complete overview of all activities, when documents were uploaded, if they were opened, etc. Good documentation is important if doubts are subsequently raised about what was presented during the process.
Companies have become more security-focused
We have found that our customers have become more security-conscious in recent years, and are using Clean Rooms more often than before. In the last year alone, sales of Clean Rooms have tripled.
Essentially, a Clean Room is a data room within a data room, which is used to share information under very restricted access terms.
Preparations are gaining in importance
When it comes to the length of the process, we can see that the average lifetime of our data rooms is eleven months. We also see differences between countries. The UK keeps the data room open the longest (399 days) and asks the most questions (181). Sweden (198) and Finland (173) spend the fewest days, while Sweden (72) and Denmark (61) ask the fewest questions.
Another observation is that more customers are setting up a new data room immediately after a transaction has ended, with a view to new sales and acquisitions processes. When the data room is based on a previous transaction and is well maintained, this will result in a more complete data room, and the probability of supplementary questions concerning the next transaction is reduced.
This shows that our customers have become more aware of the importance of an early start. The better prepared you are for a future acquisition, the greater the chance of a streamlined due diligence process.
In other words, if you have M&A plans, there’s no time to lose. Contact us to create a data room today.
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Check out some more numbers in our infographic under: