InsideTech » April 2008
Designing a Digital Deal Room
Brett Burney defines virtual deal rooms. Read about how and why you should use them and discover how you can go about setting up one for your company.
Your company is selling an old factory and the potential buyer needs to read over several hundred relevant documents immediately. What do you do?
In the past you needed several weeks to collect, organize, and box up all those documents. Today, you can simply upload them to a secure Web site where the buyer can log in for access. There's no stuffy physical storeroom to visit and no need for in-person supervision, and you can track every document that's opened and viewed.
Whether people call them “virtual data rooms” or “online deal rooms,” the concept is the same—these are online document repositories that require a secure password for access. Some folks make the distinction between “data” and “deal” rooms, claiming that a deal room offers more features beyond simply viewing documents (i.e. the ability to edit a document). Intralinks has become a popular provider of online document exchange services, and they refer to their offering as a secure “online workspace.”
The concept of a virtual data room or an online workspace continues to broaden. When the idea first appeared, such services were mainly used to exchange documents between banks involved in syndicated loans. Today, as virtual data rooms are becoming the norm in business transactions, they are being used for a multitude of purposes, such as hosting internal documents for corporate executives, producing documents in complex litigation and streamlining M&A deals.
The most appealing feature of a virtual data room is that it's open 24/7. All a user needs is access to the Internet and a password. And because each person must have a unique login, the system can track their digital footprints. As a seller, that means you can see exactly what documents your potential buyer is viewing at any time. The secure logins control what each person can see or do inside the data room.
And because the Internet is the World Wide Web, your potential buyers don't have to leave their offices, whether they're just down the block or across the ocean. Online workspaces negate the need to rent expensive storage space or play host to your potential buyers in-person.
Getting the documents into a virtual data room usually involves a scanner. If most of your historic documents are still in paper form, you can contract with an outside vendor to have them all scanned into PDF files before they're loaded up to the site. You'll need to make sure that each scanned document is accurately named so that it's easily identifiable online. You might want to also consider having your scanning vendor perform text recognition (optical character recognition or OCR) on the documents so that they can be searched.
Once you're done with that initial batch of documents, you can upload additional documents that you've scanned yourself from your own computer at any time.
An oft repeated fear about virtual data rooms is security. I asked Frank Brunetti, senior vice president of product marketing at Intralinks, if he still found that customers were concerned about this as they once were. Brunetti mentioned that security over the Internet has come a long way over the years, and he finds that conversations today focus more on the value of the service than the logistics.
Of course, costs are always an important concern when you offer a service like an online workspace. Traditionally, the biggest costs usually hit in the scanning phase of the project. If you have to pay several cents for each page that is scanned, that adds up quickly when you have several thousand documents.
