How to Use a Data Room for IPOs
Taking your company public is a big step and will involve dealing with a lot of potential investors and managing all of the various documentation involved. A virtual data room can help you make this process more manageable by fostering the communication and organization necessary to handles all of the processes involved. Let’s take a closer look.
Selecting a Bank
The first thing you will need to do is select a bank that will provide you with underwriting services. Since there will be many options to choose from, all project participants must agree with the choice of the bank. This means that a lot of communication will be involved and it is a good idea to keep all communication inside a virtual data room because it provides security assurances that communication will not be leaked and also it will be easier from an organizational point of view.
For example, if someone has a question about certain data they will be able to assign it a certain person and set question statuses. This will eliminate the need to constantly keep asking whether or not your question has been answered. Furthermore, the data room itself can produce an FAQ sheet which can eliminate redundant questions altogether. All these things that may appear to take a few seconds of your time really add up over the course of the day and can end up stealing a sizeable amount of time from you. A virtual data room can help put that time back to good use.
Due Diligence and Filling
The due diligence process involves a lot of documentation and the data room can help you keep track of all documents while providing state-of-the-art security. All of the documents can be uploaded in bulk into the data room and will be automatically indexed. The documents will also be protected from hackers and viruses with 256-bit data encryption, two-factor authentication, and antivirus scanning. This is why it is not a good idea to use a cloud service provider such as Google Drive or Dropbox because they do not come close to the security features offered by data rooms and are sitting ducks for hackers.
As far as internal security threats are concerned, the data rooms protect your documents against corporate espionage with dynamic watermarks. These watermarks will contain information such as the name of the user who accessed the document, date and time of access and the IP address. This will discourage any unauthorized document sharing since it will be easy to find out who shared which document. Also, some data rooms offer “Fence View” which is a very interesting feature that serves as a physical barrier between the document and the user and helps prevent against camera based attacks. All of these security features will help you sleep better at night and conduct your deal with more confidence knowing that all f your data is perfectly secure.
Once the due diligence process has been concluded the issuing company and the underwriter need to decide on the offer price. This is very sensitive information that might be suitable for all participants to know. The data room will allow you to set granular access permissions which puts you in the driver’s seat as far as information and document management are concerned. You will be able to decide who sees which information and for how long. Some data rooms give you even more granularity with secure spreadsheet viewing. Let’s say that you uploaded an Excel spreadsheet into the data room, but you do not want certain participants to see the formulas that were used during the calculations. This one of the most innovative features out there that allow you to restrict information contained inside a document.
When your company appears on the public market, the underwriter must provide after-market stabilization. There is a lot of risks involved at this stage since the trading price can fall below the IPO price. If this happens, the underwriter must step in and buy some of the shares back. You will be able to use the Q&A module to discuss all of the possible actions in response to certain events. If you need to have a real-time discussion, you will be able to do this inside the data room as well. It can be difficult to manage all of these stages without a data room since the avalanche of documents can consume the entire process. A data room will give you peace of mind knowing that all of your information is secure while expediting all of the processes involved at the same time.