Confidentiality during an M&A process is vital for the success of an operation. One of the Corporate Finance Industry success metric is the levels of transparency between buyers and sellers, making confidentiality a crucial in any operation.
Confidentiality and transparency have their protagonism during many phases of the process; in this article, we will refer specifically to the Data Room.
Managing confidentiality during an M&A Operation:
Managing confidentiality during this process is a crucial aspect within an operation. Usually the sellers seeks for higher levels of confidentiality but this metric may vary depending on many factors.
For example, if the seller wants a high level of confidentiality he must reduce the amount of potential buyers he reaches, but this will slow down the selling process. Vise versa, if the seller seeks faster results he must amplify his selection of possible buyers, making it more difficult to control the confidentiality factor.
This may seem like a conflicting paradox for any seller because many business owners do not posses knowledge of the different techniques that can be applied to increase confidentiality during the M&A process.
What are some techniques we can refer to regarding confidentiality during an operation?
Creating a blind teaser: This document is designed to protect the identity of the company being sold when presented to potential investors. The teaser uncovers the situation of the company but not its name. If buyers show interest a confidentiality agreement is signed to protect such identity.
Signing an NDA: Confidentiality is crucial since day one. There will be a lot of agents involved in the process everyone that is exposed to this information must sign an NDA so the idea and intention is protected and safe.
Confidentiality Agreement: This document serves two purposes. The first one is to protect the selling company’s intentions regarding potential investors once they showed interest. The second one is that the signing of this document represent a clear intention of the buyer to proceed with a possible deal.
Data Room: If the deal has gone up to the point that there is the need to create a Data Room it means that we are near to the closing of an operation. In other words we are in a sensible point in which confidentiality is vital. That’s why Data Rooms are designed to protect information since they create a virtual space in which the seller will deliver all the documentation necessary to the potential buyer to proceed with the operation.
Defining the Virtual Data Room
A virtual data room (VDR) is a virtual space where the seller uploads all the necessary documentation of the company so the buyer can have access to it and advance in the process. This transaction of information is extremely delicate and must be made only when there is a trust-worthy and robust relationship between both parties, meaning that there is already the will to invest and close a deal.
The transaction of this information is made through unique online software design to prevent any disclosure of the documentation and keep-safe all the uploaded data. The software must be a high-quality product that provides confidence, security, and safety to both parties involved in the operation.
Imagine how hard it can be for a business owner to expose the essence of their company to someone. Leaving aside the emotional factors that make this operation hard, this part of the process must have all the requirements to ensure safety within the parties.
In every scenario, work-ethic and professionalism must be applied, but when referring to VDR’s we can assure that one of the best options in the market is EthosData. We invite you to take a look at their high-end Service that guarantees safety when taking care of your documentation.
In ONEtoONE we are characterized by the level of transparency, confidentiality, and professionalism with which we handle our clients’ operations. One of our best allies is the trust we generate through our work. Therefore, we encourage you to contact us if you are looking for advisory on buying or selling your company.