Inform Magazine

George Dalton, KBS Corporate Finance Manager, who works alongside John on transactions, described another benefit of the VDR.

hat is a virtual data room, how does it work and why does it benefit those involved in a company sale? John Hunt and George Dalton of KBS Corporate Finance explain.

“It’s also good for keeping momentum on a deal,” said George. “You might have the buyer’s advisers stating they have accessed the portal and downloaded documents etc when in actual fact they haven’t, because we can view this as administrators of the portal. We’ve had scenarios where each party may blame the other over whether information has been downloaded or who is holding who up, but we can corroborate that. “It’s a well-trodden path for us - the key outcome is that we have control of the entirety of the data room process. We can ensure any relevant party has certain levels of access, making the process a lot smoother. “The software is of a high standard, it can differentiate us from other corporate finance companies - it’s a sophisticated, instant system. If you want to make amendments or updates, it happens quickly.” John added: “What’s really good is that when you grant someone access, for example the CEO of the acquirer, we know when they have gone in, how frequently, what they have looked at and what they have done with that information – have they saved it offline or printed it out?” And how do KBS Corporate clients respond to virtual data rooms? “The feedback from clients is always very positive,” said John. “Quite often, because they have never been through a company sale process before, it’s all new to them and once they see how simple and effective VDRs are to work with, they are instantly impressed. “From a security perspective, another thing we can do is overlay a watermark on all the documents in the data room. The watermark will be the potential buyer’s name so if that information gets into the public domain, we will know the identity of the party that has breached confidentiality. “A virtual data room facilitates the whole process. And when the deal has legally completed, we close the data room and put the entire content on memory sticks, which are password protected, and these are shared with the relevant parties.

Confidentiality within a company sale transaction is of the utmost importance – not only in terms of who should know the deal is happening, but the sharing of sensitive information too. At KBS Corporate, we apply the highest levels of privacy to every aspect of the process. This is especially true when it comes to due diligence, one of the most critical features of any sale. How do we ensure the vital documents that underpin the transaction are seen only by the appropriate eyes? By setting up a secure virtual data room. As John Hunt, KBS Corporate Finance Director explained, the virtual data rooms we set up are entirely technological and hosted online. Unlike the old-fashioned version, they contain no tables, chairs – or paper. “As the name suggests, in the ‘good old days’ it used to be a physical room full of data, full of boxes, full of paper,” said John. “All party advisers would sit in that room for as long as necessary, reviewing relevant documents. “Time has moved on, and we now have virtual data rooms (VDRs). We set up the VDR, which comprises all the information a prospective purchaser will review as part of their due diligence within the transaction, and we use a specialist software provider called Firmex. “The VDR is set up for all parties, as part of the due diligence process, for the prospective buyer to review all relevant documentation on the target company. This includes all relevant due diligence streams – e.g. legal, accounting, tax, insurance, environmental, commercial - and the buyer will have dedicated advisers for each line of diligence. But if multiple different advisers are involved in accessing the data, does that not increase the risk of information falling into the wrong hands? Fear not, because every feasible measure is taken to ensure the process remains airtight. “The VDR is fantastic for confidentiality, as parties are not sending emails which can easily be intercepted,” said John. “Sometimes the volume of information they are sending over is so considerable that either it can’t be sent via email, or sending via a non-confidential third party platform, e.g. via WeTransfer, there are risks. “In a VDR, the client signs in with their own personal password, which only they know, and they can upload directly online into Firmex at the flick of a button, with confidence that whatever information is sent over is securely within the data room. “When it comes to maintaining access to the data, there are several levels of access we can grant to any party, which is established depending on who is accessing the data room. You might have commercial, legal and financial due diligence with only one of these parties having access to their own area, depending on the sensitivity of the information.” Those who may be unfamiliar with the concept may consider that to be a contradictory term. How can a room be virtual? “A data room can frequently contain thousands of documents, depending on the extent and scrutiny of due diligence the buyer wants to go into.”

“The data room is then archived securely.”

Virtual data rooms are completely secure, user friendly, environmentally sustainable…and a key tool used by KBS as part of the sale process.

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