Preparing for M&A success in an uncertain environment

With a decline of 16% in deal volumes and 29% in deal values in Q1 2012 over last year, Asia has not been immune to the global reduction in M&A activity over the last few quarters. However, there were still more than 2,700 transactions and $117 billion of total disclosed deal value involving Asian targets or acquirors in Q1 and Asia remains a certain destination for companies looking to gain exposure to fast-growing consumer markets or to assets in strategically important or demographically attractive industries such as energy and healthcare.

China, Australia, India, Japan, and Indonesia have seen the most inbound cross-border activity in 2012 so far, while the most active cross-border acquirors have been companies from Japan, Hong Kong, and Singapore. Asian target sectors which have defied the general slowdown and are actually showing significant increases in cross-border deal activity by value include metals and mining, high technology, healthcare, and consumer products and services.

In the current volatile economic environment, those companies that are prepared and ready will be the ones that are best placed to quickly react to and take advantage of opportunities that may arise. These include organisations looking to sell an asset, to raise capital, or to make an acquisition. Preparedness and speed of execution are critical factors for success in rapidly shifting market conditions, where opportunities to close deals may not last long.

A Virtual Data Room (VDR) is the optimum solution for the controlled exchange of documents between parties involved in a strategic transaction. A VDR offers the ability to share confidential information and collaborate with deal participants on key deal tasks in a secure and auditable yet easy-to-access online space, while allowing information owners to maintain full control over who has access to their content and what they can do with it.

The functionality and service offered by the largest and most experienced VDR providers could make the difference between a trouble-free and rapidly executed transaction and one which fails to deliver the expected outcome. Essential features to consider when choosing a VDR provider include the following:

Rapid setup. Time is usually of the essence when provisioning a VDR. The quicker you can get the dataroom open and operational with all documents uploaded, users set up, and access rights assigned, the sooner the process of information sharing can begin. Look for:

• the ability to create a VDR from a selection of pre-built templates, specific to your deal type;
• a management tool that allows you to drag and drop multiple files and entire folders and sub-folders directly from a local hard drive, network drive, CD, USB drive, or email attachment into the VDR;
• a VDR which allows the upload and protection of Microsoft® Office and PDF documents in their native forms without the need to convert to degraded file formats such as TIFF or PDF, where key document content can be lost;
• the ability to rearrange files and folders simply by dragging and dropping and automatic re-indexing;
• the ability to quickly add new single users to the VDR or bulk upload teams of users via a simple spread sheet; and
• the ability to add tags and custom fields to your documents to help classify and organize information in ways that are meaningful to your organization and to VDR users.

Security. The security and confidentiality of critical business information in a transaction are paramount. Look for a provider who offers a multi-layer security model covering information rights management, multi-factor access and authentication controls, data encryption at the highest possible level (256-bit), document locking and protection, prevention of print-screen and screen-grabbing software, document watermarking, password sharing prevention, IP address locking, secure global data centres, on-demand customer audits, personnel security, and compliance with recognised international audit standards such as SSAE 16 SOC 2, SAS 70 Type II, and 21 CFR Part 11.

Availability. Minimum 99.5% uptime, based on multiple redundant data centres with the highest level of fault tolerance and ISO 20000-1 certification.

Optimal user experience and ease of use. An intuitive, familiar user interface based on a Microsoft® Windows® Explorer look and feel with right-click context-sensitive action menus, quick navigation, and comprehensive full-text document search functionality including Boolean, fuzzy, and complex searches allows users to rapidly find information. Check for the ability to allow users to open and view protected Microsoft Office and PDF files in their original file formats (not degraded TIFF or PDF). Look for secure access from mobile devices such as an iPad®, iPhone®, BlackBerry® or smartphone, as well as laptop or PC. A user interface should be available in all the world’s major languages, with integrated translation services for key deal documents.

Intelligence and reporting. The provider should offer detailed reports to enable you to gain valuable intelligence regarding user activity in the VDR, including the level of interest in files and folders of documents between users, which frequent keywords users are searching for, and an audit trail of how often and when a user or group of users have accessed or viewed documents. Look for an export of reports to Microsoft Excel® to enable additional analysis and formatting.

Built-in Question and Answer (Q&A) management functionality. Make sure to have the ability to manage the entire Q&A process online within the VDR, thereby eliminating time-intensive and error-prone spreadsheet-based tracking. Key functionality should include the prioritization of bidder questions to ensure they are answered in order of importance or aging, automatic routing of questions to Subject Matter Experts, response deadlines and automatic alerts, the automated real time exchange of questions and answers backed up by a full history of each question thread, and the ability to quickly monitor the status of all questions with at-a-glance dashboards.

Global, multi-lingual support. Look for dedicated, locally-based project managers to provide support for the entire transaction from start to finish, a presence in all major financial centres on every continent, an “always open” 24x7x365 help desk able to answer calls in all major languages, and multiple support options including phone, email and online live chat.

Compliance and auditability in case of post-transaction disputes. A real-time audit trail within the VDR is vital as the deal progresses, with full version histories for replaced documents and the ability to roll back and access accidentally deleted files. It should include a DVD archive containing a full deal audit trail, user activity and document access logs, reports, Q&A threads, document version histories, as well as files and folders in the VDR – which may be used in legal proceedings to help back-up claims of disclosure and for disputes.

Pricing. Pricing on a per page or per MB/GB basis, simple pricing tiers based on the expected volume of data, and no additional charges for deleting and re-uploading content (within an agreed total data storage limit) - so you can delete and re-upload pages as many times as necessary while building the VDR (within an agreed net page count limit), without having to worry about costs spiralling out of control.