Virtual Data Rooms Help Companies Manage Crises

by Jan Hoffmeister, Managing Partner DRS

The need for more transparency when carrying out financial transactions is one of the most important conclusions to draw out of the latest financial crisis. This applies not only to the regulators, who demand more and more transparency about risks taken in the financial sector, but also to corporate management itself.

At every point in the life of an enterprise, sound decisions must be made and implemented quickly. One of the preconditions for being quick is making certain that your company's processes, structures and assets are transparent. If there is a liquidity crunch or more capital is required, the sale of business units or assets is often unavoidable.

In a worst-case scenario, there is usually not enough time to gather together all the documents relevant to the transaction and to prepare them properly. Even when you are working as diligently as possible, setting up a whole dataroom usually takes at least four weeks - time a business in crisis usually does not have. This is why, if a business in crisis is to carry on in the long-term, it is a matter of basic survival to always know exactly what the possible sellable assets are and to be able - at any time - to access the relevant data and documents.

The best way to do this is to set up and continually update a Virtual Data Room. At your convenience, all transaction-relevant data can be gathered, prepared and indexed. When a potential business deal is at hand, you will not have to carry out this time-consuming process; it will already have been done. This applies especially to all the key documents that always are required. These include but are not limited to:

• Current excerpts from the trade register and shareholder contracts
• Current balances (signed) and consolidated financial statements
• Forecast and budgets
• All key contracts (e.g. financing contracts)

As soon as the basic dataroom structure is in place and the dataroom has been supplied with your company's key information, only periodic updates are needed. These can be provided automatically, such as with quarterly statements. This preparatory work means that a due diligence can be carried out without delay and the ensuing transaction finalised shortly thereafter. In this way, a company is ready to act at any time and can respond quickly and flexibly to changing market conditions.