Room Levels, Virtual Road Show, Categories and Documents in the Virtual Rooms

Above all, keep it simple to use. To review documents or files, the best approach is merely to “point and click” to retrieve information. Potential investors and buyers clearly want something straightforward that works (and which they can learn to use in a few minutes) rather than attempt something much more ambitious and complex.

Organize the virtual room by levels of security:

Entry Level - Contains general information such as a virtual road show, executive summary, outline business plan, CEO video and other general information. This is confidential information that cannot be displayed on the company’s public web site. In order to proceed to the next level of due diligence, a document such as an Accredited Investor Questionnaire may need to be completed.

Mid Level – This level often can contain the Offering Memorandum or the Private Placement Memorandum (PPM) if a private equity investment is being sought. This approach can also be used for the electronic distribution of the PPM, incorporating the delivery and tracking features to meet the “Blue Sky Laws” reporting requirements.

High Level – In order to gain access to this level, quite often a Non-Disclosure / Confidentiality Agreement is required. Contained at this level are the legal documents, agreements and licenses, as well as detailed financial statements, reports and very confidential and sensitive material such as customer lists and detailed marketing plans.

Effectively, a due diligence data room is an online filing cabinet with a series of drawers where one can store documents, presentations, photographs and audio/video files. This is where structure and control become very important.

For example, on the welcome page of the deal room there should be a welcome message explaining what the site is about. It is a good idea to offer a quick-start guide to those who are new to deal rooms so they can get up to speed literally in just a few minutes. Additionally, the entry page should also have a project directory providing contact information for individuals involved in the deal (surprisingly useful when an individual is stuck in a hotel room and needs to telephone someone) together with any other key information which needs to be shared by the involved parties.

Project Management of the Virtual Rooms

From the very beginning a due diligence project manager should be selected to coordinate the information being provided by the different groups or departments. Setting up the virtual due diligence room is a key administrative function. Once the categories and file structure, as mentioned earlier, are established, the due diligence documents and files can begin to be uploaded to the secure server.

Paper documents such as contracts, agreements and licenses must be scanned into an electronic format such as a “.pdf” file type. Keep in mind that only original, signed legal documents are to be used. This file type creates a document that may not be modified by the end user and is sufficient for most security concerns, in that printing, saving and sharing of the information may be restricted. For business and marketing plans, financial projections and presentations that are already in an electronic file format, merely a conversion of these into the “.pdf” file type is sufficient.

Fast, efficient procedures for distribution of usernames and passwords to selected individuals should be implemented. Certain individuals must have the ability to instantly assign usernames and access privileges. For instance, if there is a highly qualified investor or buyer on the phone, give him a username and password and immediately “walk” him into the due diligence virtual room and give him a tour.

Brief, weekly coordination meetings are a good idea to maintain the accuracy and viability of the virtual room. Additional and updated information may be posted, and expired or obsolete data should be removed. Any technical issues should be discussed.

Conclusion – Virtual Due Diligence Rooms

Utilizing this technologically savvy, online approach as a platform for marketing deals can very effectively improve value, shorten deal times and reduce transaction costs.

With the availability of the Internet, companies are now able to considerably “expand their reach” in seeking buyers, investors or lenders. High-level secure, virtual rooms that display, yet protect, confidential company information have significantly increased the efficiency of all parties involved in these financial transactions.

Hence, through this virtual due diligence room approach, financial professionals, bankers, attorneys and accountants representing potential buyers, lenders or investors are able to simultaneously review this comprehensive and confidential information… anytime, anywhere.

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