The Tools That Make Tomorrow’s Deals
Automated watermarking, content indexing, task tracking, redaction – the best data rooms now boast a host of labor-saving features. But, as a Datasite survey showed, these tools are about far more than mere convenience. Not only can they deliver significant cost savings, but they can also hold the key to overall deal success.
In 1926 Jack Warner, the head of Warner Bros., stated that talking pictures would never take off. Within six years, Warner Bros. profits would multiply sevenfold to $14m – thanks to talkies. In 1977, computer pioneer Ken Olsen said, ‘There is no reason for any individual to have a computer in their home.’ And as late as 1995, computer guru and cyber-spy catcher Clifford Stoll scoffed at the mere idea of buying items online.
Such hilariously wrong predictions tend to come from the experts – precisely because they know, ‘That’s just how things are done.’ Every innovation must push against the feeling that ‘If it ain’t broke, don’t fix it.’
Dealmakers aren’t immune from this inertia. Data rooms were once literal rooms, in which dealmakers might be holed up for weeks at a time. Few would deny that the virtual data room, pioneered by Datasite at the turn of the millennium, has vastly improved on that. And yet many dealmakers remain stuck in the old groove – using data rooms that are barely more than digital versions of those old windowless rooms.
Such ‘traditionalists’ now risk being left behind by those who are taking advantage of the growing range of time-and-labor-saving tools now available – at least from Datasite.
Tackling the Time-Hungry with Technology
The saying ‘time is money’ applies nowhere more than in M&A. Not only does every additional week of due diligence increase costs by an average of $100k, but it also increases the risk of deal failure by a further 49%. Yet the due diligence process is inherently time-devouring, demanding focus on fine detail and many laborious tasks – from simple file organizing to analyzing deal progress.
Therefore, every minute saved is of potentially huge monetary value – and may also make the difference between success and failure.
Here are just some of the latest efficiency tools that are turning data rooms from mere file-sharing spaces into active deal accelerators.
Bulk Watermarking
Before a deal even reaches the data room, sellers need potential buyers lined up. That requires deal marketing by email, to perhaps hundreds of possibly interested parties. With confidentiality already a priority, emails and teasers must be individually customized to discourage leaks. Such a lengthy task can delay getting to market – unless you can automate the whole process with bulk watermarking and automatic email customization. This simple but vital feature – included in Datasite’s marketing app, Datasite Outreach™, delivers an instant head start.
Content Indexing
Before due diligence can happen, all the necessary documents must be placed inside the secure data room, fully sorted and indexed so that buyers can easily find and review it. We’re talking many hours, for many hard-working humans. But now AI can be trained to recognize all the different types of M&A documents, and sort them into the optimal folder structure in seconds. It’s also less error-prone – because it doesn’t get tired or bored. All the human dealmaker needs to do is a quick final check that everything is where it should be.
Document Translation
Cross-border deals can mean added complications for data room setup – namely, all those foreign language documents. The best AI-powered indexing can still file such content, but how do you check it’s in the right place if you don’t read that language? What you need is a tool to preview such documents in your preferred language – so you can just hover over it to make sure it is correctly filed.
Centralized Checklists
Herding cats is arguably a piece of cake compared to running due diligence. A deal involves so many separate tasks, workflows, and responsibilities, that merely keeping track of who is doing what, and which jobs remain outstanding, is a mammoth undertaking. Traditionally this is done via spreadsheets and emails – quickly leading to long paper trails and version control issues, all of which consume more time. But such problems can be resolved with a single, central checklist maintained inside the virtual data room – a tracker. This can be synced to your data room index, with each task linked to its relevant documents and regularly updated. This lets you see the state of the deal at a glance, with no uncertainty.
Redaction
Data room content invariably contains yet more sensitive information that must be hidden from certain users or hidden only at certain times – or both. As a deal progresses, the information redacted at the start may need to be progressively revealed, while other information – such as personal data – should remain fully hidden. Many virtual data rooms allow for digital redaction, but finding and hiding all the necessary information, then selectively revealing it, can still be an onerous process. To minimize friction here, dealmakers need a redaction tool that can automatically find and hide sensitive information, tag all redactions by reason, and then unredact selectively in bulk.
OCR-Powered Tools
Naturally, it’s essential to be able to search through the files of your data room – not only to find particular documents but also content inside those documents. But what if some of that content is in a less accessible format, such as a PDF or even an image? For this, you need a search tool that uses optical character recognition (OCR). Datasite’s tools allow you to search across your entire project for any text, at any level, in any format – even scans. Other uses of OCR technology include ripping tables out of PDFs and images and turning them into usable spreadsheets – saving you hours of manual data entry.
Analytics
A virtual data room should be more than just a fancy shared drive. It should also serve as your deal command center and dashboard. With the best, you should be able to track deal progress from every angle. Using ongoing analytics, you can measure the engagement of potential buyers, monitor all of the deal team’s activity, check that every user’s permissions are exactly right for their role, and monitor the course of the deal to anticipate issues before they become obstacles. Midway through a deal is a murky place to be; detailed analytics will quicken progress by clearing the fog.
Findings
Thus far we’ve only talked about sell-side data rooms. But it’s equally important for seasoned buyers to be able to steer the due diligence process, especially when dealing with inexperienced sellers. This is why Datasite introduced the first buy-side data room, Datasite Acquire™. In any such data room, one feature that makes a huge difference is having a single place and format for all findings. All potential risks to the deal can therefore be quickly and easily assessed and addressed.
Q&A
Whether you’re on the buy side or sell side, questions will inevitably fly back and forth between you and the other party. This traditionally happens via emails and spreadsheets – a notorious recipe for delays, omissions, and confusion. To prevent such friction, look for a data room that supports a built-in Q&A process so that everything takes places centrally and securely. You can then see exactly which questions are still outstanding, which ones have been answered, and whether those answers are satisfactory. You can also control who has responsibility for asking and/or answering.
Virtual Data Rooms for When Every Minute Counts
Doing things the old ways may sometimes take only a minute longer. But a deal comprises so many moving parts that all those minutes swiftly add up to hours. And very often, a powerful tool will save you not just minutes but hours, or even days – in which case the total time gained may equal weeks. With a week equating to roughly $100k in costs and a 49% greater chance of success, it’s clear that time-saving tools are about far more than mere convenience. In today’s M&A market, they could make the difference between celebrations, and gloomy regrets.
Contact the Datasite team today to receive a live, personalized demo or request your quote.
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