Q. What trends do you see?
We see a lot of activity across sectors, particularly in aerospace & defense, real estate, healthcare, industrials, transportation and tourism. Credit markets have tightened since 2017, restricting access to capital. M&A is still booming, but we have seen a slowdown compared to business in 2017.
As a result, people are more hesitant to launch sale processes. Compared to 18 months or a year ago, there is more thought about: “Do we want to start this deal, and is it going to go through?” People are a little bit slower to pull the trigger.
Brick and mortar businesses like consumer retail have been restructuring and divesting assets for years. The market slowdown may exacerbate the fundamental challenges facing those sectors, speeding those processes up.
On the due diligence app side, many companies are starting to view document management as an integral part of the entire M&A lifecycle, not just a short-term transactional event. As a result, they are approaching us as more of a partner, weighing factors like long-term client satisfaction and data security more heavily. And that really wasn’t being done 10 years ago.
Q. What are some common due diligence app misconceptions?
1. You can’t use us until the transaction process officially kicks-off. I don’t think everyone involved in strategic transactions realizes they can use our service while they are gathering information and before the diligence process formally kicks off. Assembling and organizing documents on the data room from the beginning helps you avoid a lot of emails back and forth and the potential of sending sensitive documents to the wrong person. It’s just a more structured approach and makes everyone’s life a lot easier.
2. Vendors are apples to apples. Talking to data room vendors directly about how they can help you in the vendor selection process also is something commonly skipped, especially in the middle market. Many times people will just get three quotes and decide without spending 15 minutes with their local sales rep. A quick call often results in reducing costs substantially and saving deal teams a ton of time working in the data room.
There are many assumptions about pricing, security and services that are not correct, and if you speak to someone with experience in the market, he or she can educate you on those differences quickly. Look at the Statement of Work (SoW) proposal; see who sent it and give them a call. It’s worth asking, how do you compare with another platform? What security do you offer, and is that offered by XYZ? What does your pricing include or exclude? What kind of transaction are you working and is your contract customized for that deal type?
3. All customer service is automated. People don’t realize that part of the service DatasiteOne provides is regional 24/7 project management support. Our managers can set the entire project up for you, offer you index recommendations and train you on the platform. If I were a customer, I’d have no clue. I’d just assume customer service is okay and I’ll have to do a lot myself. I wouldn’t expect I’d get white glove service included.
4. Vendors should be left in the dark. As with other advisors, the more information I have, the more value I can add. For instance, if you tell me who your banker is, I can check to see if we have preferred pricing with them. What if your deal is in healthcare - have you checked to make sure all the vendors you’re vetting are HIPAA compliant?
If you’re a banker representing a large organization that has tight security restrictions, you might want to tell the vendor, so they can provide a high-level summary of their security practices and certifications and explain how they differ from the other data room providers you are considering for your client
Q. What is the DatasiteOne difference?
Clients seem to enjoy the speed and how intuitive Merrill’s platform is. They also appreciate how easy it is to add data, set up permissions, find the material they are looking for and receive help from our project management team anytime they need it.
The biggest thing customers feel when they work with us is how much we care about them. Coming from a competitor, that is something that still blows me away. Having an entire organization that hugs the customer makes such a big difference. You are dealing with a provider that genuinely wants to help you.