A data room is a tool that is used during the sale of a business to ensure success and limit risks for a seller.
The first step of Nash Advisory’s sale process is to educate the owner of the business on the sale process. This includes:
- Outlining various buyer options
- Providing a detailed sale timeline
- Identifying capital raising opportunities
After confidentially collecting requested information from the owner, and learning about the business and industry, a valuation report is prepared about the business detailing where the business is positioned for a sale.
In the second step of Nash Advisory’s process is the preparation of a secure data room. A data room is a cloud based product used for housing data, usually of a secured or privileged nature.
Virtual data rooms have emerged over the past decade to allow for secure sharing of information between a myriad of parties involved during a transaction.
Who will have access to a data room in a typical transaction?
- The owners management team
- Nash Advisory
- The owners legal advisor
- The buyer and their:
- Accountants
- Lawyers
- Authorised financial institutions
Without a data room it is very difficult for all of these parties to securely share information – thus risking the chances of the deal falling over. The data room also has a Q&A module which allows for communication between parties which is tracked over the course of the transaction.
Ultimately the data room will become a legal document which references into the legal sale agreements.
What sort of information is in a data room?
- Financial information
- Tax information
- Legal documents
- Company particulars
These files can number from 50 to over 1,000 depending on the size of the business and its complexity.
Features of a virtual data room
Security
Virtual data rooms offer a level of security like that of financial institutions and major banks. A sign of a secure data room provider is one that is ISO 27001 certified; the only auditable standard permitted when the requirements of an information security management system (ISMS) are met.
This is complimented by other international standard security features such as GDPR, SOC 2, and HIPAA. Customised user permission and data encryption both at rest and in transit, protected by multiple firewalls, mitigate the risk of your confidential information being leaked.
Control
Permission settings allow the creator of the data room to control and enforce, at a user or group level, measures such as disabling the ability to print/download sensitive data, include watermarks on confidential documents, and to set an expiration date on particular documents or revoke full access at any time.
Ease of Use
The sale of a business can require review and amendments of thousands of documents, so it is essential that documentation is well-organised and clearly numbered to help avoid delays and to keep the process moving.
A sign of a good data room provider is a quick and intuitive bulk upload feature and a versioning feature to provide the third-party reviewer piece of mind that they are reviewing the latest version.
Detailed activity tracking
A key feature of the virtual data room is the ability to track, on a per user basis, how many times each of the individual documents have been accessed; invaluable to the sales process when there are multiple parties involved.
Integrated Q&A Module
An integrated Q&A function within the data room means that questions can be easily and quickly referenced from the documents that they relate. Answers are collated by the corporate advisor ensuring that a sophisticated process is as simple as can possibly be.
How much does it cost?
A data room comes with many specialised features, adding value to the overall service. Similar to any product or service, the basic version is capable of performing the majority of functions, however is somewhat limited to uses for very simple and straightforward transactions.
Typically, with an average transaction with the mid-level functionality applied, a data room will cost between $1,000 - $2,000 per month. These monthly costs reduce administrative needs and the hassle of communicating with buyers. Ultimately reducing the likelihood of mistakes and delays which can negatively affect the transaction.
One example of a premium data room platform provided by Nash, and offering all the above core capabilities, is Ansarada. In this case study, Nash worked with Ansarada to implement a solution that would differentiate client services, reduce information silos and increase collaboration before, during and after transaction.
