Virtual data room services allow organizations of any size to securely store their data, cooperate on projects, and facilitate dealmaking. 

If you haven’t enjoyed the benefits of implementing VDR in your business yet, read this article to learn what a virtual data room is and how to choose the best virtual data room provider for your company’s needs.

What is a virtual data room?

A virtual data room is a cloud-based repository for the secure storing and sharing of sensitive data and other types of corporate files. The hallmark of virtual data room providers is the enhanced security they offer, ensuring the privacy of their users' data. This is what traditional file-sharing services don’t have.

Every virtual data room vendor provides a set of features that improve internal corporate security, facilitate dealmaking, and enhance productivity. 

Virtual data rooms are often used for due diligence during such complex financial transactions as M&A, private equity, venture capital, or loan syndication.

  Note: A virtual data room is also often called an electronic data room, online data room, virtual deal room, or simply VDR.

 7 factors to consider when choosing virtual data room software for your company

When considering using a virtual data room and searching for the best option, pay attention to the following seven factors.

1 - Provider’s experience 

Usually, the more experience a particular vendor has on the market, the more quality service you expect to get when using it. However, it doesn’t always work that way. 

Sometimes, younger virtual data room providers offer more modern services and are much more user-friendly. 

2 - Usability

Virtual data room software has to be easy to set up and use for all users, regardless of their technical background. 

On top of that, the best virtual data room providers usually offer a few deployment options and a set of integrations. This way, you can reach your virtual data room from any device and enjoy working with your favorite software products like Zoom, Slack, or Microsoft Office without the need to leave the VDR space.

3 - Pricing 

Virtual data room pricing depends on many factors: from the provider’s expertise and recognition to the variety of features offered.

 Additionally, every vendor has its subscription model: some charge on a per-month basis, while others offer quote-based pricing and consider every customer individually.

On top of that, most virtual data room providers offer a free trial that lets prospects test the platform before purchasing a subscription.

4 - Features set

The variety of features a particular virtual data room vendor provides is what usually distinguishes it from others. 

As a rule, there are features for document management, document security, tracking, collaboration, access management, and user management. Think of what your company would need from a virtual data room and search for it.

5 - Security

This is probably the most important factor since a VDR’s mission is to maintain end-to-end security of its customers' data. 

The variety of security measures a vendor can take ranges from multi-factor authentication to several data centers in different locations.

It is also a must for every provider to at least have such world-acclaimed certifications as ISO 27001 and compliance as SOC 2.

6 - Quality of customer service

Customer support service is also important since all data room members — including employees, investors, and directors — should get knowledgeable assistance when they experience any trouble with the software. 

Make sure there are a few ways to contact the support team and that every specialist can help you out.

7 - Customization options

The best virtual data room providers also introduce customization features that enable users to give a virtual data room their company’s look and feel. Customization options usually include the ability to tailor logos, headers and footers, and invitation emails.

Tips on selecting the best online data room software

On top of the key factors that you should consider when choosing the best virtual data room, there are also a few extra tips.

➔    Read reviews. There’s no better way to find out what user experience to expect from a particular vendor than reading real users' feedback. 

➔    Put the best data room providers to a test. Most likely, you’ll have a few favorites when searching for the best VDR solution. To decide on the winner, compare virtual data rooms, taking advantage of the free trials they offer. Also, conduct demo sessions and talk to the customer support team.

➔    Consider your budget. If you’re launching a startup or have a small company, your budget might matter a lot. Think of what price you’re ready to pay and define the services you expect to get for that cost.

Summing up

Virtual data room software is a cloud-based repository where you can securely store and share sensitive corporate data.

 When choosing the best VDR provider for your needs, consider its experience, usability, set of features, pricing structure, security measures, quality of customer support, and customization options. 

 On top of that, it would be nice to explore real customers’ feedback, test a few vendors, and think of your budget. 

Those companies that had invested sufficiently in digital technologies were much better equipped to deal with remote working and closed offices. But the crisis also exposed any lamentable lack of investment by companies in such technology. This was true for companies across several industry sectors. But to highlight some of the common key issues, Drooms surveyed* professionals in Europe’s real estate industry, which is certainly a good case study for a sector known for its historical reluctance to ditch paper-based processes.

Limited impact

We wanted to examine how the pandemic had impacted the adoption of digitisation in the European real estate market. Our results showed that while the pandemic did have some impact here, the extent of it was more limited than we expected.

Just over two in five (41%) of our respondents said that the European property market had only been moderately influenced by digitisation over the six months to September this year. Although a minority, this was still the most common response. Around one in four (24%) believed that digitisation had had a major impact on the sector, with 28% saying it was ‘slight’ and 4% said ‘not at all.”

However, more than two in five (43%) of our respondents also said digitisation would increase the efficiency of businesses processes, and a further 30% expect that it could dramatically reduce costs while 27% said it could create significant competitive advantages.

Digital laggards?

Although traditionally seen as a technological laggard, the real estate industry does appear to have adopted digitisation to some extent. The highest proportion of respondents (37%) said they had digitised between 50% and 74% of their processes but only 1% said they had achieved complete digitisation of all processes. But no respondents said they had no digitisation in place or had no plans to introduce it in future. 

Key weaknesses

Our respondents were clear about what they saw as the key weaknesses in the technology currently applied in European real estate.

While poor network resilience and security have historically been key drivers of real estate companies’ reluctance to entrust customer-facing processes to new technology, these appear to have diminished in importance. The most common weakness highlighted by our respondents was the lack of integration between different systems and platforms used in the sector, which was cited by 44% of respondents. Almost one third (29%) also said that another key challenge is the lack of applications that are available to replace the paper-based processes that still pervade. But 11% still believed that poor network resilience is the biggest problem, while 10% point to inadequate security.

Key themes going forward

More than a third (36%) of our respondents believed that remote working will be the most important theme for the real estate market in future. The next most common theme cited by our respondents (28%) was the expected arrival of more integrated technology that will improve efficiencies across the whole real estate value chain.

These responses were entirely unsurprising. For some time, we have seen firms calling for greater connectivity in their business processes. But this greater connectivity requires the practical use of interfaces between software solutions.

At Drooms, we are facilitating this by opening up our application programming interface (API) so that our virtual data room (VDR) platform can connect to other systems, enabling asset managers to save both time and workload effort, and reduce costs.

Virtual Data Rooms

VDRs bring tremendous efficiency and an array of functionalities to M&As, IPOs and non-performing loan and real estate transactions as well as management of assets throughout their lifecycle. Launched around 20 years ago, they served as online versions of the physical spaces where confidential or sensitive information was held for review by authorised parties. They now provide a secure, online platform for accessing confidential documents and handling business processes with a range of added functionalities.

Huge shift

Although not as significant as might have been expected, the coronavirus pandemic has had an impact on the digitisation of the commercial property market. The industry has largely performed well despite the challenges, which is no doubt due to robust online systems having been put in place.

What our research does underline however is that companies do need to continue implementing digital solutions to achieve greater efficiencies, lower costs and higher productivity. To achieve this, firms should rigorously review their business processes to assess what can and should be meaningfully digitised to enhance business performance.

For the challenges will only continue as technology evolves. The pandemic has created a huge shift in how organisations manage their operations and this has exposed a substantial need to re-think data transfer needs.

Security and the speed of transfer have become key priorities to ensure the smooth running of remote working teams and IT departments must lay the groundwork to ensure large documents can be made available at any location via a structured storage platform to help teams continue working digitally and seamlessly.

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*The study was a quantitative survey using an online questionnaire consisting of seven questions. Customers and interested parties in Europe were invited to take part in September 2020 via email. A total of 538 real estate experts responded. The full survey can be accessed here: https://bit.ly/383EHYV.

The impending Brexit will also be a key factor driving M&A. Companies with sales in the UK and the European Union will have to decide whether they will still want a foot in both markets. Buying UK companies has become more attractive now because Brexit has weakened sterling and made UK assets significantly cheaper. Brexit has also made UK companies unloved, depressing their share prices and making them attractive takeover targets. But UK companies will have to factor in the extra expense of buying EU companies priced in euros if they wish to establish a presence on the continent.

M&A is making a comeback

The evidence pointing to increasing M&A activity is strong. Q4 this year has been the third strongest for M&A activity in two decades, according to the Financial Times*. So far, US$612bn worth of deals has been agreed in Q4, up from $461bn and $491bn in the same quarter in 2019 and 2018 respectively.

While the last quarter of a year tends to be the busiest for M&As as dealmakers try to close deals before the year-end, the number of deals will likely be even higher this year as the backlog of deals caused by the pandemic comes back into play.

The economic background is also supportive of M&A activity. First, the cash required for takeovers is readily available. With interest rates at all-time lows and expected to stay so for some time, it is easier for companies to borrow funds than ever before. Second, the subdued global economy means companies will be strongly tempted to boost their revenues via takeovers.

Certain sectors are more prone to M&A activity. For example, smaller listed companies will become targets because of depressed share prices, while hard-hit sectors such as leisure, tourism, travel and retail will see a lot of struggling businesses become takeover targets. Valuing companies will be harder in the uncertain environment though and buyers able to show flexibility in terms of valuations will be more successful.

As competition hots up in the M&A market, participants will need to ensure they have the right resources to lead the pack. Personnel and expertise are key of course, but they also need the right tools. And a tool that makes deal-making significantly easier is a Virtual Data Room (VDR).

Virtual Data Rooms add efficiency to deals

VDRs bring tremendous efficiency and an array of functionalities to M&A transactions. They began around 20 years ago as online versions of the physical spaces where confidential or sensitive information was held for relevant parties to view. They now provide secure online access to authorised users to conduct the deal process and come with a range of added functionalities.

The Drooms VDR, for example, can be set up quickly and easily, enabling users to operate in a fully regulatory-compliant framework immediately.

So far, US$612bn worth of deals has been agreed in Q4, up from $461bn and $491bn in the same quarter in 2019 and 2018 respectively.

All the required documents can be uploaded, and invitations given to various interested parties, who can be assigned different levels of control within a secure environment. For premium security, documents are transferred exclusively via an SSL connection with AES encryption and a 256-bit key length.

Extensive reporting features mean all activities conducted within the VDR can be tracked and by use of Optical Character Recognition technology, desired terms can be searched for among all index descriptions and documents, with all hits flagged to users. International deals can be made even easier by real-time translations of documents, with new languages being added regularly.

VDRs continue to make substantial technological progress. Some now even incorporate blockchain technology and artificial intelligence (AI). The former is particularly useful in keeping a ledger for legal purposes while AI can be instrumental in conducting highly efficient due diligence.

Due diligence is crucial

The due diligence aspect is pivotal. Being able to conduct due diligence as quickly and accurately as possible is crucial. Failure to do so is the prime reason behind the mistakes made in deals, both by acquirers and those looking to sell.

For sellers, a VDR can help optimise and smooth the due diligence phase. They help to impress and attract a range of buyers, maximising deal values and preventing unwanted surprises by improving the accuracy of historical and financial data and fixing existing discrepancies before negotiations start.

For buyers, optimising due diligence means they can more accurately assess the true value of a target company, for example, in terms of identifying and capturing synergies, resolving leadership issues and assessing how to merge systems and processes. It helps them to prepare fully before a deal closes and afterwards when the integration process must be put into effect.

Leading-edge tools are required

Fierce competition and pressure to do deals mean that players in the M&A market need leading-edge tools if they are to operate effectively. This will likely become all the more apparent in the New Year as Europe adapts to Brexit and recovers after the shock of the COVID pandemic. The winners in the M&A market will be those who ensure VDRs are their first tools to hand.

*Source: Global M&A recovers on vaccine hopes and US political stability, 17 November 2020

Even the most optimistic observer would have to accept that the number of businesses at risk of going bankrupt or insolvent will rise dramatically.

The owners and managers of such businesses should not despair, however. Even the best entrepreneurs can fall to misfortune and it may be that there is still value in their enterprises that could be highly attractive to investors. And using the right online tools to manage insolvencies and subsequent sales can make the process significantly easier and more efficient for them.

The options for businesses on the brink

When a company’s liquidity reaches crisis levels but is unrelated to COVID-19 and there is no prospect of resolution, then its directors must file for insolvency, usually within 21 days. Any delay risks legal consequences for business owners. It is rare for a sales process to be started before insolvency proceedings because the debt burden usually reduces the purchase price.

Even struggling businesses can be sold, however. There are two ways in which this can be achieved during insolvency proceedings. These include:

• Insolvency plan procedure – This is enacted either by insolvency administrators or debtors. Under such plans, secured and ordinary creditors can determine the realisation of an insolvency and manage the distribution of proceeds among creditors.
• Transferred restructuring – This involves the transfer of a company’s assets, wholly or in part, to another legal entity via an asset deal negotiated by the insolvency administrator.

A crucial element

A crucial, and often under-appreciated, element in restructuring and insolvency procedures is due diligence, which can be conducted in a highly efficient manner by using virtual data rooms (VDRs).

VDRs are also commonly used to streamline mergers and acquisitions, IPOs, non-performing loan transactions and commercial real estate sales. The popularity of VDRs can be attributed to the significant improvements they deliver to the speed and effectiveness of negotiations and the collection and analysis of data.

Even the best entrepreneurs can fall to misfortune and it may be that there is still value in their enterprises that could be highly attractive to investors.

Some of VDRs’ key attributes mean they are indispensable in insolvency cases. For example, their highly functional and secure platforms facilitate organised access to documentation at any given time, which is particularly useful at the start of a corporate restructuring process when critical information must be collected to formulate a suitable plan. Once the correct plan has been drawn up, VDRs are also effective tools for selling parts of a business in line with the overall strategy. Trustees or liquidators, who must sell assets for the best prices possible, can speed up the sales process and minimise the risks of wider events undermining deals.

Key VDR features

Generally, there are several features that prospective users should look for in a VDR. These include:

Proper data indexing – As soon as information is collected, it can be structured according to requirements. Records can, therefore, be overseen and researched immediately, with any gaps easily identified.

Auto allocation of documents – The process of analysing and sorting large volumes of documents automatically can become more accurate and sophisticated over time if the VDR applies machine learning and artificial intelligence (AI).

 Fast setup and support – Many providers offer free initial preparation phases followed by ongoing access to documents once they end and 24/7 project management in several languages.

Flexible access to documentation – Users can control which relevant parties are allowed online remote access to certain documents and data, wherever they might be. VDRs generally provide this without compromising security.

Ease of search - Advanced search and filter functionalities enable documents to be selected and analysed to reveal potential risks and opportunities. Drooms’ FINDINGS MANAGER, for example, is context-sensitive and recognises words, synonyms and semantic patterns.

Improved reporting – Analytics and reporting features can provide a better understanding of a project plus which users are accessing what information and when.

Centralised Q&A - A built-in, fully automated Q&A functionality can keep multiple relevant stakeholders up to date simultaneously. This can be a key contributor to the success of projects.

Conclusion

While the COVID-19 crisis will have many consequences for years to come, the sharp increase in people working from home has highlighted to many companies the importance of seeking digital solutions that facilitate online remote access. Holding on to past paper-based practices is not even a medium-term option now. VDRs, especially those that incorporate AI, blockchain technology and application programming interfaces, will play a key part in this digital evolution for many companies – including those facing the challenges of bankruptcy and insolvency.

“Banks have responded to this new paradigm, digitising their processes by leveraging and making decisions based on data and analytics, and shifting their focus on consumer experiences that go beyond mobile and online”, says Rosanna Woods, UK Managing Director at Drooms. “They have realised that to remain competitive and maintain market share they need to be more strategic and technologically adept, recognising the need to invest in automation, core modernisation and digitisation.” Below, Rosanna tells us why a collaborative approach is the way forward.

 The changing landscape of investment banking

2019 is proving to be a momentous year for the global investment banking industry as it returns to normalcy in terms of profitability and capital adequacy. Global M&A activities, mainly by large US banks, are creating opportunities to expand overseas and acquire FinTech startups.

Today, most investment banks are enthusiastic about digital transformation initiatives to reduce costs and improve customer experience. Although investments banks adhere to their conservative business model, digitisation has shifted power to investors, who favour partnering with banks that are digitally more advanced.

Opportunities amid regulatory challenges

In Europe, the introduction of wide-ranging regulations has also impacted the working environment for banks. For example, the Second Payment Services Directive (PSD2) has encouraged innovation and competition between incumbents and FinTechs, while implementation of the revised General Data Protection Regulation (GDPR) framework has given EU citizens comprehensive data protection, forcing banks to ensure the privacy of customers’ data.

While addressing the myriad requirements of these new and contradicting regulations makes data management more daunting for banks, the major challenge for most of them is that data is being managed in siloed and disparate systems, making it all the more difficult to understand clients’ needs and demands.

Today, most investment banks are enthusiastic about digital transformation initiatives to reduce costs and improve customer experience.

However, the good news is that more banks are recognising the capabilities of cognitive technologies in gathering intelligent insights on customers, compliance and operations making collaboration with FinTechs more attractive. Also, robotic process automation (RPA) is rapidly gaining popularity as it brings productivity benefits to the table.

Helpful technology

The advent of Artificial Intelligence (AI) has been particularly helpful for banks in processes including client servicing, trading, post-trade operations such as reconciliations, transactions reporting, tax operations and enterprise risk management.

While much of the media attention towards AI has focused on its potential capacity to replace humans, at present it is seeing much more practical use in terms of complementing human intelligence. ‘Augmented’ intelligence involves machines assisting humans in their decision-making processes.

A sub-field of AI – Natural Language Processing (NLP) is a good example of augmented intelligence in practice. NLP systems are designed to read and interpret human languages. A key application of this in relation to banking is the analysis of substantial amounts of ‘unstructured data’, which is data that as yet cannot be ‘read’ by machines, such as PDF files, images and audio materials.

Banking is a data-intensive sector and many key tasks demand correct interpretation of partly structured data. Therefore, NLP has the potential to make processes much more efficient with less effort required from humans. As such, FinTechs have been quick to apply this technology because of its value in improving customer interactions, making collaboration with them attractive for most banks.

The advent of Artificial Intelligence (AI) has been particularly helpful for banks in processes including client servicing, trading, post-trade operations such as reconciliations, transactions reporting, tax operations and enterprise risk management.

Role in M&A

Technologies such as virtual data rooms (VDRs) come into their own for banks when used in M&A deals, helping to address many of the challenges such pursuits face even at the best of times. There are several key causes of failure, including politics around the deal, culture clashes among the personnel involved and, in particular, parties being unprepared for the due diligence phase. In this latter regard, M&A deals rarely fail because of a lack of knowledge. Rather, it is about how that knowledge is handled. Over half of deals fail because those parties involved are reluctant to confront issues head-on.

Buyers often proceed with deals despite the challenges because they feel obligated by the amounts of time and money involved. They should, however, be prepared to cut their losses if the risks outweigh the benefits. For example, allocating inadequate resources during the review stage cost Bank of America $50 billion in legal fees post its acquisition of Countrywide Financial in 2008, let alone the reputational damage it suffered for inheriting the past mistakes of the mortgage lender.

A VDR enhances the M&A process by increasing the power to collect, process and distribute information to the right parties with much greater security and accuracy. It digitises relevant documents, automates tasks and streamlines workflows.

Authorised users, including those inside a company and their external stakeholders, are connected digitally and in a secure environment with real-time access to all relevant documentation, depending on users’ individual permission levels.

A VDR enhances the M&A process by increasing the power to collect, process and distribute information to the right parties with much greater security and accuracy. It digitises relevant documents, automates tasks and streamlines workflows.

Creating a database in which documents can be updated consistently gives asset owners full control and the ability to react to the latest market conditions, bringing assets to market quickly when the conditions are right, sometimes at short notice.

One of the strengths of the Drooms NXG VDR is its Findings Manager function. This improves the vendor due diligence both prior and during the sales process. It allows for the automatic pre-selection of documents and helps in the assessment of potential risks and opportunities within a transaction. This yields greater control, instils confidence in potential buyers and cuts disruption to existing business.

Blockchain first

Macro forces such as blockchain are also slowly revolutionising many areas of banking. For example, blockchain made it possible to automate approvals of contracts as well as protect the transfer of confidential data from hackers and fraudster whenever transactions are made. In 2018, Drooms became the first provider to move its VDR offering into the blockchain age, using this modern technology to enhance the security of transaction data archives. Up to that point, all data had been stored on physical data carriers following completion of a transaction. But now it can be stored on Drooms’ own servers with blockchain protection. As a result, the secured data cannot be lost, is non-manipulable and is accessible to all parties involved in a transaction at any time.

A new threat

As more financial institutions start to adopt technologies created by FinTechs, a likely threat is emerging. Tech giants such as the likes of Amazon, Alibaba, Apple and Google are attracting customers in the payments domain by offering alternative ways of managing finances. In the US, Amazon is already offering its customers the option to turn spare change into gift cards, and parents can also give children their allowances via a reloadable debit card for example. In India, customers pay delivery fees through a Cashload feature and store excess cash from previous purchases in their account, as well as deposit money for future orders.

With platform companies’ potential to exploit customer data and come up with innovative solutions to address customer pain points, there is a lingering risk of disintermediation for banks. Customers who feel that tech companies alone meet their banking needs may decide to switch to non-banking channels. And there is also the possibility that tech giants may provide banking services in the future, making services provided by banks non-exclusive. Although big techs pre-dominantly target the origination and payments domain of banking, a stronger foothold by platform companies could threaten the survival of many banks in the industry.

Towards modernisation

The various areas of the banking industry will undoubtedly continue to evolve at varying speeds. And as time progresses more banks will likely partner with innovative FinTechs to remain competitive and market relevant. Potential for creative and ground-breaking collaborations and advanced modernisation will also likely increase.

That said, as technology transforms the future of banking, so ought banks’ mindset towards cognitive technologies and collaboration with FinTechs. After all, technology is not a panacea and it is accompanied by many challenges as well as opportunities.

Blockchain has been synonymous with crypto currencies for some time but its range of applications and roles in the wider digital transformation are now much more fully understood. This is certainly true of the financial industry, which is gradually shaking off its legacy systems and incorporating this revolutionary technology into an ever-growing number of uses.

Blockchain is correctly described as the technology behind crypto currencies, recording transactions made between parties. But its key and unique feature is its capacity to provide an undisputed audit trail. It establishes an incorruptible digital ledger of transactions that can be programmed to record every data item of value.

In practice, Blockchain acts like a single spreadsheet copied thousands of times across a network of computers. This spreadsheet can be updated on a constant, real-time basis and is shared identically across the network.

Using Blockchain, two strangers can conduct business with no need for a third party, while creating a legally-indisputable record of an agreement. As such, there is no point of weakness at which data can be corrupted or hacked. This issue is of growing importance for those players involved in deals in which adding more contact points increases vulnerability exponentially.

Using Blockchain, two strangers can conduct business with no need for a third party, while creating a legally-indisputable record of an agreement.

Transactions are more efficient and secure

Each year the financial industry conducts trillions of euros-worth of transactions and Blockchain has the potential to revolutionise how these deals are executed.

Blockchain streamlines and speeds up transactions, facilitating fast and secure payments with less cost, potentially anywhere in the world. The security that Blockchain provides is also a key element in that it renders the tactics used by cybercriminals as obsolete.

JP Morgan, HSBC and Bank of America Merrill Lynch are already exploring Blockchain to facilitate international payments and trade-related transactions but Blockchain can also be used in the real estate sector, for example, to conduct transactions, including the transfer of properties and escrowing of funds.

Smart contracts can deliver powerful changes

Blockchain can also be used to apply ‘smart contracts’, which are still at a nascent stage of development, but which have the potential to deliver powerful changes in a wide range of sectors.

Smart contracts have the terms of agreements written into computer code and this enables the automation of certain functions, such as authorised parties conducting transactions according to the terms. A simple illustration of this is a vending machine, which enables a consumer to buy a bar of chocolate at a fixed price without the need for any third party.

Blockchain can also be used to apply ‘smart contracts’, which are still at a nascent stage of development, but which have the potential to deliver powerful changes in a wide range of sectors.

Smart contracts have tremendous potential. They provide security and consistency and help to reduce transaction costs, not least by reducing the need for ‘middlemen’. At present, they are far from flawless and work still needs to be done to address the grey areas that, in practice, often arise in contracts and transactions. There is much room for refinement, but such contracts do already have clear applications. In real estate, for example, smart contracts can keep track of leases and monitor payments. Going forwards, smart contracts can only become much more commonplace in the financial industry.

Incorruptible long-term data storage

The technology by which computers store information has gone through several cycles over the decades. Data carriers have seen evolution from punch-cards and magnetic tape to floppy and zip discs, to the more familiar CDs, DVDs, hard drives and USBs. While the latter formats are still widely used, they are clunky and perishable.

Drooms is the first virtual data room (VDR) provider to recognise Blockchain’s potential in the transaction space and incorporate it into its product offering. By using this technology, information that was previously archived using DVDs, hard drives and USBs can be authenticated at the click of a button.

Such documentation is invaluable in the legal guarantee phase of a transaction. If there is a legal dispute, then there can be no argument as to who accessed which documents and data and when. Parties cannot argue that they were misled with regards to what they were buying.

Drooms is the first virtual data room (VDR) provider to recognise Blockchain’s potential in the transaction space and incorporate it into its product offering.

Drooms is also storing the data on its servers for a fee for the duration of a warranty period. Whereas DVDs might be lost or corrupted over time, for example, this issue does not exist if a data room is available for reactivation whenever required and all data has been verified and archived according to a unique Blockchain record. All parties with a password will be able to access the data at any time and without the need for notaries.

Ahead of the technology curve

Drooms’ current goal in relation to Blockchain is to provide tamper-proof, cutting-edge and long-term data storage and protection with quick, secure and unrestricted access for all parties involved. We currently offer all modern formats of storage, but we have no doubt that Blockchain will eventually supersede these, not least because it will not fundamentally alter the costs of a VDR initially and over the longer run it will only reduce them.

Going forwards, financial professionals need to consider the power of Blockchain to disrupt their businesses and industries and to pinpoint ways in which they can leverage this ground-breaking technology to their advantage.

Further ahead, we see tremendous potential in applying Blockchain to the incorporation of digital signatures and improving contract analysis. Enabling clients to sign documents within a data room, thereby avoiding third-party involvement and the need to print and sign documents before re-uploading them to the system, boosts efficiency without creating inferior versions of contracts.

Thanks to Blockchain, future data rooms could enable users to read and pull up previously unsearchable contracts that have been signed by specific parties, thereby automating traditional contract management.

Going forwards, financial professionals need to consider the power of Blockchain to disrupt their businesses and industries and to pinpoint ways in which they can leverage this ground-breaking technology to their advantage. Our plan is to help our partners by staying ahead of the technology curve, finding new and innovative ways in which to help them using Blockchain.

Website: https://drooms.com

Headlines have raised fears in recent months that robots threaten many of our livelihoods. However, Jan Hoffmeister from Drooms says that those in the private equity (PE) industry should instead be encouraged by how Artificial Intelligence (AI) technology can give them an edge in a competitive marketplace.

AI technology cannot replace human thinking in relation to strategy and business planning, which are fundamental to PE. But it is an impressive tool when it is correctly incorporated into the more process-driven functions of PE firms, increasing the power to collect, process and distribute information to the right parties with much greater speed and accuracy.

The need to stand out is imperative in the highly competitive PE market. Analysis by EY¹ shows that while the industry has made a strong recovery after the crash of 2008, there is also a lot of ‘dry powder’ sitting in the wings because of intense competition for deals.

Total PE commitments globally stood at US$530.7 billion in 2016, which was close to the US$616.7 billion pledged in 2007. However, in 2017, only US$440 billion of transactions took place versus US$748.4 billion in 2007. In terms of dry powder, there was US$525 billion sitting without investments in 2016.

The key issue is that the right investment targets with appropriate valuations are hard to find. Offering a solution to managing the deal-making process helps a PE firm stand out amid intense competition. Using a virtual data room (VDR), which leverages AI technology, makes a firm best in class, whether it is used for a one-off transaction or to create value in assets over their entire life cycles.

Successful PE firms are thorough in their due diligence, nimble and open-minded to pinpoint the right opportunities and disciplined about formulating the right investment philosophies.

There are two key areas in which a VDR is useful for PE firms, particularly if it is used during the ‘hold’ phase of an asset. The first is consistency, in that documents can be updated regularly, giving the vendor full control over data, sourcing investment targets and achieving correct valuations. The second is responsiveness – documents are always ready, so assets can be bought or sold whenever required.

Given that the intention of PE firms is always to sell an asset, it is especially relevant for them to establish a ‘life cycle’ VDR that can be used to manage a company throughout the period of ownership, from purchase, through management and on to divestment.

A VDR connects authorised users, including those inside a company and their external stakeholders, digitally and in a secure environment with real-time access to all relevant documentation.

A VDR always makes documents relevant to a transaction available to authorised parties and helps ensure that they are up-to-date. All data is stored securely online on a server platform and is always accessible to both internal and external parties, depending on their individual permission levels.

Creating a database in which documents can be updated consistently gives asset owners full control and the ability to react to the latest market conditions, bringing assets to market quickly when the conditions are right, sometimes at short notice.

One of the strengths of the Drooms NXG VDR is its Findings Manager function. This improves the vendor due diligence both prior and during the sales process. It allows for the automatic pre-selection of documents and helps in the assessment of potential risks and opportunities within a transaction. This yields greater control, instills confidence in potential buyers and cuts disruption to existing business.

Those PE firms involved in cross-border deals will find the Drooms transactional room particularly useful. It includes a tool that translates documents in real-time, ensuring risk assessments are maintained in a timely fashion throughout the process.

Essential elements

The integrity of documentation is paramount for PE firms. When deals are going through, unclear, incomplete or erroneous documents can cause all manner of problems, including sales falling through. Documentation must provide an accurate assessment of the value of an asset.

For clarity and transparency, a VDR must also have a stringent and standardised index structure for all assets within a portfolio. All an asset’s documentation should be organised in the same manner, allowing quick access to relevant content for the purposes of comparison. Long-term value can be created in assets if they are encapsulated by standardised and sustainable data – and life cycle data rooms are the optimum tool for this purpose.

The practicalities

In practice, careful planning is essential to manage a life cycle VDR successfully. This starts with getting an accurate snapshot of a project’s current progress using key metrics such as available (and missing) documents.

The time frames, processes and the responsibilities of all relevant parties should be defined, and their commitment secured to the proposed solutions, including any changes to management processes.

All the relevant documents must then be collated and, if necessary, digitised before being uploaded to the VDR. Finally, the VDR must be regularly monitored and maintained, updating and adding documents as required.

Most powerful tool in the box

PE firms that wish to manage a market currently characterised by dry powder, high valuation and enhanced competition need to adopt beneficial technologies. A VDR adds value at all the stages of an asset’s lifecycle, including buying, holding and selling, making the whole process much smoother. The value added in terms of making better deals, improving operational efficiency and enhancing the transparency increasingly demanded by stakeholders makes a VDR one of the most powerful tools at a PE firm’s disposal.

¹Source: EY, Global PE Watch, 2017

The global initial public offering (IPO) market has been a double-edged proposition this year.

Activity levels were down 21% at 660 IPOs globally in the first half of the year versus the same period in 2017, although the volume was 5% higher at US$94.3 billion.*

The reduced activity could be attributed to a backdrop of increasing risks, including trade wars and geopolitical tensions. However, economic fundamentals and equity valuations remain strong, meaning an IPO is still a tantalising prospect.

High profile successes and failures so far in 2018 highlight the potential rewards and risks in the current environment. Major successes this year include the US$3.2 billion Axa Equitable IPO, while the failed Aramco IPO demonstrates the high risks and costs involved.

Companies that wish to go public should consider all the factors that can help maximise the chances of success. In an increasingly digitised world, ignoring the benefits of rapid technological progress, would be a costly mistake.

Technology cannot replace humans in relation to strategic thinking and business planning, which are fundamental to any company. But it is an impressive tool when it is correctly integrated into the more process-driven functions of firms, increasing the power to collect, process and distribute information to the right parties with much greater speed and accuracy.

IPOs are stressful

An IPO is one of the most stressful activities that a company can go through and success is often dependent on a business’s ability to handle high volumes of data in a consistent and timely manner. Companies need to demonstrate transparency and control to all stakeholders, including regulators and potential new shareholders.

In practice, Virtual Data Rooms (VDR) are used exactly for that purpose. Virtual data rooms connect authorised users, including those inside a company and their external stakeholders, digitally and in a secure environment with real-time access to all relevant documentation.

A VDR ensures documents are always available to authorised parties in a secure environment and helps ensure that they are up-to-date. All data is stored online on a cloud platform and is always accessible to both internal and external parties, depending on their individual permission levels.

Creating a database in which documents can be updated consistently gives asset owners full control and the ability to react to the latest market conditions, bringing a company to market quickly when the conditions are right.

Post-IPO benefits

Companies should consider the benefits that a VDR will provide after a successful IPO. It is highly likely that compliance standards will be more stringent for listed companies. Ongoing use of a VDR will aid transparency and speed of response to regulators’ requests for information.

The extra security provided through a VDR is also invaluable and it can be updated as new regulations come through. For example, the European Union’s General Data Protection Regulation came into effect in May with the aim of safeguarding individuals’ personal information. It imposes complicated demands upon companies but these can be met through the use of VDRs, which can be continuously audited and adapted to new requirements and technology as they develop.

Documents create value

The value of having robust documentation for companies going through an IPO is hard to exaggerate. Unclear and/or incomplete data and documents often lead to price reductions and can even cause an entire sale to fall through. It also leaves companies open to regulatory actions if they cannot demonstrate due diligence.

It is crucial that a VDR has in place a stringent and standardised index structure for all assets within a portfolio, which promotes clarity and transparency.

Lifecyle VDRs: 5 elements to success 

Careful planning is required to ensure that a life cycle VDR is structured correctly and that it includes all relevant documentation. There are five elements to implementing this.

First, before starting a project, it is important to get an accurate picture of the situation e.g. how far has a project progressed? How many documents are missing?

Second, time frames, processes and the responsibilities of all relevant parties should be defined.

Third, a project’s success is dependent on the acceptance and participation of various parties, so these should all be included in seeking solutions to the challenges posed by the need to change management processes.

Fourth, documents must be gathered from both internal and external sources and will sometimes need to be digitised before being transferred into a VDR. Detailed reports should be drawn up showing which documents are available and those that are still missing.

Finally, maintaining a life cycle data room is an ongoing process. Documents should be updated regularly, with new documents added as they become available.

Clear advantages

Creating and maintaining a VDR can be a challenge initially, requiring a cultural change and an overhaul of processes for some companies.

But for those companies looking to go public, it would be perilous to ignore the benefits afforded by adopting a VDR such as Drooms NXG, which was the first data room to integrate machine learning technology to streamline workflows. Through increased efficiency, accountability and higher transparency, it can streamline the process to a highly successful IPO, giving senior executives the time to concentrate on strategy and business development - the pursuits that human intelligence still does best.

*Source: EY, Global IPO trends: Q2 2018

Website: https://drooms.com/