7 Reasons You Should Use a Virtual Data Room for Your Exit30 September, 2014
If an exit is part of your business strategy you know that an efficient, easy-to-use virtual data room can be the key element in gaining that slight edge on a transaction—an edge that can be the difference between a great deal, a good one, or one that quickly goes south.
The due diligence process, which used to be so timely, cumbersome and costly, has been streamlined and simplified by today’s virtual data room.
For the seller the virtual data room offers distinct advantages:
#1 Close Faster
When engaging in the due diligence process, time is not your friend. Extended or delayed diligence timelines almost always result in reduced value.
Your goal should be to compress the due diligence process and close quickly. Modern VDRs streamline the due diligence process for parties on both sides of the deal so everyone saves time and money. A process that in the past could take months can now be accomplished in weeks.
#2 Know Your Buyer
Knowing how interested your buyer is and what issues interest them can give you the edge in the heat of negotiations.
Virtual Data Rooms let buyers search and review all of your company’s relevant documentation, but at the same time they capture a record of user activity that can be very valuable to you. For example, if your company’s environmental documents are viewed over and over, you’ll know the buyer has environmental concerns.
As a seller you can use this information to gain valuable intelligence about a buyer’s issues and proactively address their concerns.
#3 Throw a Bigger Party
In the days of the physical data room it could take weeks for a potential buyer to examine its documents and make a decision or offer. Then another party could be invited in to repeat the process. The entire process could take months.
With a virtual data room all parties can attend simultaneously, at any time and from anywhere, not only shortening the due diligence process, but enabling more buyers to compete. Just like in an auction, having more bidders translates into a higher sale price.
#4 Maximize Competition
Presenting your due diligence documents in a virtual data room is not only professional, but it creates the perception of competition in potential buyers’ minds. This perception of existing competition can accelerate deal timelines and increase deal value.
#5 Facilitate Buyer Collaboration
When contemplating the purchase of a corporate asset, buyers expect to get full disclosure about every facet of your business. They need to collaborate well as a group, get the right information to the right people in a timely manner, and ask questions of the sell-side team. A good virtual data room not only organizes due diligence materials so the people who need to see them can find them quickly, but also provides a Q&A module so buyers can ask questions and get answers promptly.
#6 Buyers Expect It
When a buyer approaches your business they’ll most likely provide you with a due diligence checklist and request that all the documentation they require be organized in a virtual data room for easy review. But you don’t have to wait for that request. It’s smart business to be prepared for the due diligence process even if an exit isn’t on the immediate horizon. Get a sample due diligence checklist, and ensure all the documents a buyer will want to scrutinize are up to date and organized. Then, when a buyer knocks on your door, you’ll have a virtual data room populated with all your corporate data in a matter of hours. For a sample due diligence checklist, click here.
#7 Stage the Sharing of Sensitive Information
“Populated with all your corporate data in a matter of hours”? Does that sound frightening? It should, but the beauty of today’s modern virtual data room is that it allows you to stage the sharing of sensitive information as appropriate to the deal process. Start with general financials and aggregate employee information and as a buyer demonstrates commitment to the deal, give them the more detailed information they require in order to move the deal forward. A virtual data room makes the process simple and completely secure.
For more information on how a modern virtual data room can facilitate the due diligence process and enhance deal value, visit www.sharevault.com.