There's a lot to think about when you are considering selling (or acquiring) a company. Information must be shared and questions answered in a carefully controlled manner. This is precisely why data rooms have become pretty much mandatory when initiating a merger and acquisition (M&A) process.
In addition to storing and structuring documents, a virtual data room’s role is also to ensure that these sensitive documents can be securely shared in confidence with external parties.
Today, company transactions are increasingly taking place across international borders, which means that the need for intuitive, user-friendly data rooms, regardless of language, is greater than ever before.
In this article, we briefly explain the advantages of using a data room, and give you a simple introduction to some of the common terms associated with it.
A data room is tailored to streamline and support due diligence processes. It allows your company to share confidential documentation and perform Q&A rounds in a user-friendly, intuitive, and secure environment.
The data room is designed to provide easy-to-use procedures for all parties. The solution ensures rapid, transparent and secure information sharing in the event of M&A transactions, restructuring, stock exchange listings, capital acquisition, procurements, and outsourcing.
Due diligence, as you’re likely more than aware, is a thorough investigation into the economic, legal, and general status of a company. It is a critical core aspect of restructuring processes, company divestments and the evaluation of new strategic partnerships or acquisitions.
The company must be prepared to disclose everything from customer contacts to bonus agreements, patent certificates, and more. The relevant documents provide a sound basis for effective due diligence.
When carrying out a due diligence process, it is vital to be well-prepared, as this process is crucial for the final valuation of the company. This is a very challenging process for the company, but a data room will simplify the process as much as possible. It ensures all your documents will be well-structured and ordered, and may be prepared ahead of time. More than anything, a data room is a secure distribution channel for sensitive documents.
An administrator has control over all users, settings, and documentation in the data room and can add or make changes to the access rights of users. The administrator is often, but not always, the company's CFO. Other administrators may be legal or financial advisors, and it is not unheard of to have a number of administrators in the same company.
A clean room is essentially a data room within the data room that’s used to share information with especially limited access.
As some documents may be especially sensitive, they cannot be shared with the whole M&A team on the buyer’s side. A clean room allows you to grant access to a small, select team.
A “clean team” is the common term for the group granted access to the clean room, typically a smaller group of the buyer’s advisors plus the clean room’s administrator(s).
This ensures you stay on top of compliance and privacy demands, while still providing the larger M&A group with trustworthy information to make their decision.
A Q&A module provides an easy overview of questions and answers relating to documentation and information. Q&A can be used as a simple question and answer function, or provision can be made to delegate, sort and structure questions. This will be managed by a “gatekeeper”, who will delegate and qualify questions and answers before they are published.
It’s worth taking the time to create a solid Q&A, to ensure the buyers can easily find answers to the most commonly asked questions themselves.
A client manager is a person who assists the client with the start-up and administration of a data room. The client manager should be available for administrator support throughout the process and for extra security during the project.
There is a lot to understand and learn about when it comes to data rooms and the specifics of how they work. Hopefully, you now have a but more insight about the components of a virtual data room, and the terms that are often used in connection with M&A processes. If you want to learn more about how Admincontrol can help you with your virtual data room needs, reach out to us and speak with an expert today.