By Brandon Mavleos, Sr. Director - Product Marketing
In the 25 years that Datasite has supported the financial community, one big lesson we’ve learned is to embrace change. Markets wax and wane, investor preferences evolve, outside forces cause businesses to rethink the way they work. The events of 2020, however, seem to have compressed a decade’s worth of change into a few months. Companies that were healthy just last year suddenly find themselves with liquidity issues—especially in vulnerable sectors like retail and energy. Many have decided that restructuring is the best course of action, and they’re reaching out to expert advisors for help. If you’re one of those advisors, you’re probably bracing yourself for some long, stressful days ahead. What you might not realize is that there are steps you can take now to help things go much more smoothly.
In speaking with many restructuring advisors, I’ve come to recognize several hurdles in navigating the process. Right from the get-go, you face a long list of urgent requirements—learning the client’s business, evaluating the current debt structure, facilitating creditor communications—all of which has to happen at a lightning pace. Organization and preparation are key and having the right software tools can make all the difference. That’s where a virtual data room (VDR) comes in.
A VDR is a critical resource when going through the restructuring process, providing a secure document repository for complex situations. They can make your life—and your clients’ and counterparties’ lives—a lot easier. Provided, that is, you’re using your VDR to its full potential. Here are some tips to help you do it.
You have enough on your plate handling your client’s restructuring strategy; you don’t need to also fend for yourself when it comes to a VDR. No matter which VDR you use, speak with your provider’s project management team. They can help with everything from VDR set up, to building the data room, to maximizing your VDR’s tools. They’ll have the materials you need in case you need to train your team members or pass along setup instructions to another party, such as creditors or potential investors. Make sure your provider offers 24/7/365 multi-lingual customer support in case you, your client or counterparties need help along the way.
As you begin to navigate the storm, start to collate essential documents. Even if it’s too soon to give other creditors or investors access to this information, better to organize it now. You’ll be glad you built your index and started plugging in documents ahead of time, rather than scrambling to do everything at 100 miles an hour after the process kicks off. Some VDR providers even offer advanced preparation capabilities, such as artificial intelligence, to guide you through the arduous tasks of structuring your index or identifying relevant categories.
Keeping track of who can see what, can feel like the most complex task in managing due diligence . If you’re just using a standard file-sharing platform—relying on manually granting and revoking permissions for every user, every time something changes—you’re taking a big risk. A commercial-grade VDR can eliminate that manual effort. These VDRs make it easy to set up defined roles and grant users or groups access to data sets—including specific documents, groups of documents or entire projects. This flexibility is essential in a restructuring process. It will give you the confidence to share information with multiple creditors and other groups at scale, without worrying that a small error or omission could throw the process into turmoil.
Based on our global survey of 2,235 M&A practitioners, having the right tools for restructuring is critical. In a restructuring process, every minute can matter, especially if there are court-mandated deadlines involved. Features such as bulk file upload, document previews and optical character recognition (OCR) search (to search scanned PDFs as easily as text documents) can save valuable time. Also, don’t take security for granted. Especially if your client is shedding assets or engaged in a complex workout, you’ll want best-in-class controls. The last thing your client needs during restructuring is a GDPR or CCPA violation due to data leakage. Look for a VDR with ISO/IEC 23001 certifications along with other security controls.
Put down the sharpie… We’ve found that nearly 75% of projects need redaction. In a restructuring process in particular, you’ll likely need to redact sensitive counterparty and proprietary customer data to ensure compliance with privacy rules. If you’re taking the old-school approach, you can expect to add extra hours or even days to your timeline—or burn valuable dollars outsourcing the task. Commercial-grade VDRs offer a better option: integrated redaction capabilities. Right from the data room, you can quickly define who can see what and when. The most advanced platforms let you redact or unredact across hundreds of documents with a few clicks.
Fielding and answering questions, is an essential component of any restructuring process. This process also tends to be among the most unwieldy, with information spread out across disparate emails and spreadsheets, and a need for complex coordination among many stakeholders. Just as with redaction, full-featured VDRs can make Q&A much simpler, automating multi-party communications and document-sharing. This also adds an extra layer of security to the process, eliminating the risk of accidentally emailing a sensitive file to the wrong person. Some VDRs also allow you to share FAQs with creditors and investors, making it easy to comply with fairness mandates during a bankruptcy process.
Whether you’re recapitalizing with investors or exploring the sale of a distressed asset, understanding what counterparties are thinking will help you secure the best outcome for your client. By closely observing how parties engage with the data room, you can capture timely insights that can make all the difference—especially if a pivot is needed. Who is viewing which documents? What terms are creditors searching for? How can we keep track of this intelligence for potential future audits? The latest VDR analytics tools can give you these and other answers instantly.
With high emotions, tight timelines and complex data-sharing requirements, restructuring can be challenging enough as it is. Why add hours of cumbersome manual tasks to the mix if you don’t have to? Today's commercial-grade VDRs can make every step of the process more streamlined, automated and secure. Take advantage of what they have to offer. Your clients, colleagues and counterparties will thank you.
Are you preparing for a restructuring, capital raise, or M&A? Talk to Datasite. We’ve supported thousands of projects for the world’s leading financial institutions and advisors, and we have the expertise to help you find the right solution. Contact us now.