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Why deal makers should use a Virtual Data Room (VDR)

Corporate Director at Sterling Technology, Michael Taylor walks you through the ways a virtual data room (VDR) can help deal makers successfully execute deals confidently, without delays and with smart insights.

Interview: Michael Taylor, Corporate Director at Sterling Technology
Michael has over six years’ experience in M&A. He understands what is important to deal makers and how to solve client's potential issues before they arise. At Sterling, Michael works with our European corporates, helping them successfully execute deals without delay.

Why should a deal team consider using a virtual data room before they start their deal process?
Well, so much work goes into a deal even before the project goes live. Whether it’s the team’s first deal or their 50th, the same questions always come up, and they are:

  • How do I get my IMs to the right people?
  • How do i prioritise my IM follow up?
  • What is the best way to increase my buyer pool?
  • And, how can I get to market in good time?

These are the main problems that sellers face when they’re marketing a deal and a virtual data room can help solve all of them.

How can deal makers succeed with their deal marketing?
The way that you market, display your assets and liaise with your buyers will directly impact the success of your deal.

Tracking this process without a VDR is messy as well. If sellers send hard copies, or dozens of emails to communicate Teasers and IMs to the market, they’ll struggle to identify the most likely buyers – I’ve seen this cause so many delays.

The VDR is popular because it relieves this stress and wasted time. It means sellers host one Teaser and one IM that is accessible to hundreds of prospects. It’s easy to follow-up with the correct prospects as well, because the VDR tracks their activity and reports on it.

What about their Due Diligence phase?
Whether I’m discussing the use of a VDR to a Banker, a Lawyer or to a Corporate client, the objectives for all stakeholders in the deal team are the same:

  1. get to market without delay
  2. focus on the best buyers
  3. lower risk as much as possible (data loss, wrongful disclosure etc.)
  4. move the deal quickly
  5. achieve the highest possible price

Only a virtual data room can achieve all these objectives simultaneously.

What are the key factors that deliver successful deals?
From my experience, and from what my clients tell me, it’s more about the things deal makers are able to avoid that help them the most! Some of these pitfalls are:

  • using manual workflows
  • using multiple workstreams and platforms
  • using non-compliant or unsecure systems

How can a deal team best prepare for a successful due diligence phase?
This success relies on the quality of their planning. It’s important that the whole deal team, so that’s the corporate, legal and advisory teams are aligned before kicking off the deal.

To avoid version control issues for example - which cause cross-team confusion and costly delays – the deal team needs to centralise, automate and standardise the collection and organisation of their data.

If a team succeeds at this, then it will be apparent to buyers once the deal is live. Clearly structured DD data keeps buyers interested and reduces the opportunities for buyers to price chip. It’s a win-win!

How can a VDR help the due diligence process?
The most common questions clients ask me when they’re jumping into due diligence are:

  • can we increase the efficiency of finite (and stretched) resources?
  • how can we optimise our buyer communications to articulate value?
  • how do we increase competitive tension to defend our valuation proposition?

Without answers to these questions, deal teams will be forces to pull all-nighters trying to stay on top of everything. The right VDR can make like easier for everyone.

I know that sometimes deal makers are forced to work outside of the VDR. This could just be a preference or that that their Q&A tool on their current VDR can’t cope with the complexity of their requirements. Teams end up with cumbersome parallel Excel processes that become a constant source of confusion, costly mistakes and delays.

Experienced deal teams know this, and so do I. Which is why Sterling have a more powerful Q&A tool that goes above and beyond to help deal makers avoid this outcome altogether.

How can deal makers increase competitive tension?
Having competitive tension is a nice position to be in. However, buyers can be lost if deal makers can’t keep the right buyers interested.

The Sterling VDR has actionable insights, so sellers can see exactly what their buyers are looking at in the VDR. With this tool the deal team can anticipate lines of inquiry and prepare answers in advance. Confidence in the asset is maintained and potential buyers are engaged for longer.

Then comes (hopefully) the deal signing. This is probably the most nervy point of the deal where the role of the VDR provider is critical to keep confidence in the deal so nobody is left at the altar.

We embrace the role and guarantee full compliance archives in 24 hours. Of course, no two deals are the same and require different and sometimes new approaches. Which is why our support model is set up as an agile extension of your deal team, who are able to free up your resources.