Investment bankers play a key role in most Virtual Data Rooms. Their role matching companies and assets with bidders and driving the M&A transaction is critical to make deals happen. Investment bankers normally create significant value to their clients, specially when they focus on one specific industry for many years and are able to read and sometimes even set M&A trends. Based on fourteen years of experience running Virtual Data Room processes, we have noticed that investment bankers play a crucial role to make the deal happen by:
1) Deciding the right time for a transaction
Market conditions play an important role. Good business fundamentals in a given market enable investment bankers to pursue a valuation that their sell-side client is looking for. Usually when market conditions are pessimistic, these valuations are hard to come by because bidders are very conservative with their bids. Since investment bankers have a good sense of how the markets are, they go into transactions only when they feel that the conditions are optimal to get close to the value that their client wants.
2) Building a compelling acquisition case
Investment bankers need to tell potential investors why they should acquire a particular company. They need to understand their client inside out in order to recommend the proper valuation they should sell at, as well as invite multiple parties to bid for the company. The more compelling the acquisition case, the more bidders will be involved in the due diligence process and the more the chances to conclude the deal successfully.
3) Analyze and look for potential interested parties
This requires an extensive network, a compelling acquisition case to approach this network with and a rigorous screening process to ensure that the due diligence does not expose the confidential secrets of the selling company.
4) Convince the seller to use a virtual data room and help decide which one
To ensure that the process of due diligence is done in a manner than does not put the company and its trade secrets at unnecessary risk, Virtual Data Rooms are recommended. The use of technology to control, audit and run the whole bidding process enables the right bidders to enter the process and the disinterested parties to exit the process at the click of a button. This also enables the best valuation to be reached at record time.
5) Lead the process to build the due diligence documentation
This is the most mundane part of the process that investment bankers hate being a part of. Finding, collating and digitizing a clients documents can be a lengthy process that can take months. It requires proper indexing, numbering and scanning to ensure that nothing material has been missed. Any lapse in proper documentation could mean a stalling of the process later. Virtual Data Room providers who provide support through scanning, indexing and advice, help investment bankers go through this stage effortlessly by also saving them time.
6) Run the process to decide when participants are added and what permission they have
Usually bidders are given staged access to Virtual Data Rooms. In the preliminary stages only a small percentage of data might be given access to. Only upon seeing interest for further information by the bidding parties are more documents made available. Since investment bankers are also the main administrators of the Virtual Data Room on which they are running the deal, they are the ones who decide when the participants are added, whether they should be allowed to print and copy certain documents and how long they should have access for.
The Virtual Data Room industry would not exist without Mergers and Acquisitions. Since investment bankers and lawyers drive most Mergers and Acquisitions they have an incentive to bring sellers and buyers together to conclude multi-million dollar deals; that is how they make the bulk of their money. Given their knowledge of the industry, what drives them and what is required to make them grow successfully, investment bankers create compelling acquisition stories with which they approach prospective bidders who have an incentive in growing their own industries. From the ideation stage till the time an agreement is signed between a buyer and a seller, the one constant throughout the process is the investment bankers who uses Virtual Data Rooms are a strategic tool to carry out his plans.