I was having a beer with a very old friend the other day. Well he is not that old but I seem to have known him for ever. He consults to large companies in Hong Kong mainly on change management and strategic development and was bemoaning the complexities of a large merger and acquisition he was helping one client with. Since my company offers VDR services, this was my chance to really astonish him with my knowledge of the subject – my little piece of one-upmanship. It worked but it also helped solve his problem.

Even the least savvy investor understands that the more efficient and organised the marketplace a seller trades in the more optimal his/her transactional value is going to be. More efficient markets attract more potential buyers with access to that seller. Thus financial professionals have to invent new strategies to achieve these high levels of efficiency for their clients.

The financial landscape has also changed in recent years and many investors are now favouring the M&A markets as an alternative to IPO for a successful exit strategy. Enormous technical advances and the advent of the internet have certainly contributed greatly to the streamlining and honing of those types of transactions, most notably the advent of the Virtual Data Room or VDR.

Gone are the nightmarish due diligence days of the past with sellers trying to juggle access between several interested buyers each of whom was searching for the proverbial needle in the haystack piece of information amongst scores of documents with inevitable time overruns. Buyer numbers were limited by time constraints and also geographical distribution.

The VDR changed all that. Putting all the relevant data online has meant using an organised directory structure and making it easily searchable. Potential buyer number are almost unlimited and access can be gained from anywhere in the world. Most of the barriers and roadblocks presented by physical data rooms have gone. This has meant greatly increased information flow to potential buyers, vastly reduced transaction related costs for sellers and accelerated the complete deal cycle. It has also helped mitigate many of the uncertainties that made buyers hold back from committing themselves and helped minimise some of the potential post-close liabilities that used to arise from non-disclosure mistakes. Best of all sellers can now track progress and gauge interest levels and are therefore better armed to optimize the potential outcome of their transactions.

Potential buyers also benefit from reduced direct expenditure, fast access to relevant data and reduced levels of uncertainty. This way they can make better informed decisions much faster.

It is fair to say that over the past decade no technology has had more influence on deal making that the VDR. Purchases are now made under far more beneficial market conditions and these have enormous influence on transactional values. While the seller would appear to be the real winner in this new scenario it has also greatly benefitted the buyer too. He or she can now participate independent of geographical considerations; gain access quickly; authenticate that information through Q&A sessions; and arrive at their decisions faster and with greater levels of confidence.

“Caveat Emptor,” translated to “Let the buyer beware” has always been the main principle of trade and sales throughout history. Buying goods, real estate or any asset can be a straightforward transaction where all information can be easily reviewed or a harrowing experience where relevant information can be difficult to find, disorganized and generally unreliable. In the world of M&A transactions, the demand and popularity of using Virtual Data Rooms for due diligence reflects the importance of bridging the gap of supplying information that any buyer will need. So indeed, sellers must ensure that all relevant information to facilitate the sale is made available. Access to various financial statements, valuation and technical reports, material contracts, deeds or incorporation records should be easy, but also controlled and often restricted. With the advent of technology, sellers can allow buyers to conduct due diligence in a controlled and secure environment. Being able to direct how documents are shared means control and along with password protection, high levels of encryption. Secure servers are the basics for these controlled and sensitive environments.

Sellers may find themsleves in a variety of situations that bring out different aspects of their transactions. For example, there will be some instances where a buyer is actually in direct competition with the seller. How does the seller balance the risk of letting such a buyer have free access to sensitive information and at the same time facilitate the due diligence process for the other buyers? There may be other instances where the seller already has a good perception of the potential buyer’s interest and considers more information should be made available to just that highly-rated buyer? A well-designed permissions system in a VDR addresses these issues and allows the seller to control which documents can be accessed by which buyers. Additional control can be granted over viewing, printing, or saving of specific documents. From both the seller and buyer angles, this all needs to be done on a real-time basis where the seller can change the settings as new events occur ensuring that buyers have all the access rights they need.

As buyers pore over all the information to complete the due diligence process, there is a flip side. A side where the seller gains great insight during the due diligence information sharing process as it occurs in the VDR. With buyers demanding easy access, 24/7 availability and speed in sharing documents, and with sellers actually taking up the responsibility of disclosure by hiring a VDR provider, there is actually a distinct advantage that arises which is unique to sellers – the advantage of having valuable intelligence on the buyers. What exactly is this buyer intelligence? Since all review activity is carried digitally and online, access to documents can be tracked and sellers can use this data to gauge a buyer’s mentality and also formulate an insight in his thinking process. How many times has the prospective buyer logged in? How many times has he viewed a particular document? Which documents were printed out? Imagine if a certain financial document was viewed 15 times more than any other document or that one prospective buyer logged in just once and only for 10 minutes ? Such insight can be extremely useful in helping sellers map their strategies and prepare for the Q&A process.

As buyers exercise their right to information and perform due diligence to ensure their buying decisions are justified, sellers, through deployment of a well-designed VDR system, can also be “in the know”. Comprehensive activity reports from the Virtual Data Room can usually provide valuable insights about buyers. In our VDR offering, as we let the buyer beware, the seller can now be aware.

Ever changing market situations can propagate and alter perceptions so much so that it can make or break a deal. Timing in M&A transactions is essential and with such high volatility, even a minute can represent significant change in outcome. The importance of time and increasing demands of clients depicts just some of the reasons why a tailored approach to each transaction is vital.

The internet has brought about an opportunity that is continually being utilized to optimize the management of M&A transactions through emails and document exchanges. However, this may not represent the full set of security and confidentiality that may be adopted in a Virtual Data Room where documents although made readily available are locked virtually and set with different accessibility permissions to each different party. In the past Physical Data Rooms was the only way to collate and organize an M&A transaction’s due diligence process. This however, poses many issues that conflict with the need for speed in today’s environment.

Virtual Data Rooms today, allow for this need for speed and has the ability to supersede previous methods managing M&A transactions. Clients have commended our platform’s ability to allow for access at their fingertips on a 24/7 basis, without discounting the significance of security and confidentiality. Vite iRooms is an all online platform, where real time updates in today’s perpetual markets serve as one of the many differentiating factors for M&A transactions.

For example, instances have occurred where the deal is coming to a close, disclosure of highly confidential documents can securely posted and viewed immediately and may even have the power to dictate the closing of the deal. Real time updates or changes can be conducted and updated immediately without the need to reconstruct the index and structure of the documents which will further slow the M&A process.

Bringing the world closer, with the advent of the internet still requires more then just a faceless service. Although, sell side advisors may well be located in the capital cities, their clients may still be located in areas away from these financial centers. Such examples can be seen in China, with deals originating in Shanghai and Beijing yet with Hong Kong managing the process and bidders around the region. Thus, support not only to the sell side advisors and the company would be required for the set up but also in terms of local language, technical support and project manager support to assist until the close of the transaction.

Local support and assistance also provides the difference in the speed of reflecting and action on requests. Having teams in the key centers locally ensure that requests are taken care of in real time and that you wont have to place your requests to varying third party providers detracting again from an optimal outcome.

We understand your need for speed and your need for local support, allow us to take on the bulk of your previous administrative nightmare of setting up for the due diligence process. Instead, enjoy a local dedicated project manager supported by 24/7 customer and technical support teams to assist you throughout your transaction.

I will just leave you with a quote from one of the transactions we had worked on. “I take this opportunity to thank you and your team for the amazing work done. It was an extremely difficult process for all parties involved and the iRooms guys sure carried their load, being remarkably helpful and reactive round the clock. The electronic dataroom was central to the due diligence process carried out by all interested parties and was key to the success of the transaction.” – Stephanie Seegmuller, Corporate Finance Group | Investment Banking, Merrill Lynch International.

The flurry in M&A activity in China highlights the increase in its shopping spree despite the offset of last year’s market conditions. With over US$31.1 billion spent on overseas M&A alone as of May 27th, China has already surpassed the total expenditure for the whole of 2007, according to Dealogic.

Several factors such as the stronger Yuan have benefited the Chinese economy despite the global crisis and have made foreign companies an attractive investment for Chinese companies. Stimulus and encouragement from local Chinese government through low interest loans and a variety of other beneficial policies have accounted for this boom in activity that is unlikely to slow. On top of these policies, the Chinese government controls a treasure trove of the largest foreign exchange reserve, totaling over US$1.76 trillion that can be used to further act as a stimulus to the economy.

As a result of the recent global crisis in the economy and capital markets, the valuations for foreign companies have declined whilst the Chinese firms are sitting on large cash balances built from recent years of steady and profitable growth. Chinese firms have also had the advantage of being in an environment of high domestic liquidity, a strengthening Yuan, political push for global expansion and the need for raw materials and new markets. These are just some of the key issues as to why Chinese firms have been able to pursue M&A activities and expansion.

With the mining and energy sectors at the forefront of Chinese M&A news, Chinese firms are continuously snapping up mining assets domestically and on an international level while the credit crisis hinders on their western rivals. This is evident in such transactions as in June where Shenzhen Zhongjin Lingnan Nonfemet triumphed with their bid over Indonesia’s Bumi Resources for Herald Resources and where potential bids for stake ownership in BHP Billiton, Baosteel Group eyeing Fortescue Metal Group and Chinalco’s $19.5 Billion deal to buy convertible bonds from Rio Tinto.

In other industries, Chinese state owned banks have been gearing for expansion to build global networks such as with ICBC setting a record for a stake purchase of South Africa’s Standard Bank.

With such rampant activity and growth within the M&A sector in China, the importance of Chinese language capabilities is a requirement for each transaction. Financial advisors today are becoming increasingly more tech savvy and have implemented to a certain extent their preference for a Virtual Data Room offering that increases the efficiencies of each process of the transaction. Until recently, Virtual Data Room platforms had predominantly been adapted to the English language, however with the rising demands of Chinese client’s multilingual support will become a mainstay for the VDR industry.

Here at Vite iRooms we have recognized the importance of multilingual support especially for Chinese language. During the indexing and building of a Virtual Data Room, street names, building names, material contracts and specific documents can be translated but their original meaning may not be conveyed. A loss in translation would result in impeding the progress of the transaction and creating a variety of hassles for parties involved. Our clients have since been able to maneuver around these issues and instead upload their original documents and index in Chinese. This would mean that the documents, folder names and index structure can all display Chinese.

After much planning and product development, this month SNP Vite is excited to launch an all Chinese Virtual Data Room platform. Vite iRooms has responded to the demands of the industry and have developed not only a platform that can display Chinese documents and index structures but more importantly allow for full Chinese language navigation. Vite iRooms is proud to not only have the infrastructure to support an all Chinese platform not only in traditional but also simplified Chinese, but also to provide multilingual customer service and project managers to facilitate each project. So now you can finally provide access and allow for all parties to utilize an all Chinese Virtual Data Room Platform.

Nowadays, with expectations from stakeholders, management, and clients governing how companies buy, sell, expand and run at breakneck speeds, being able to exchange and host critical information is a requirement in the world of business. Confidentiality, security, and service are expected. To achieve returns, remain competitive and grow companies need to exchange critical information on an array of transactions, projects and archives. Be it a M&A transaction where due diligence is the primary purpose, a special expansion project for a company where confidential information is shared with external consultants or the management of historical documents across different subsidiaries a solid platform built on the expectation of confidentiality, security and service would prove to be extremely useful. Here at Vite iRooms, we are proud and excited to be part of this equation or more aptly put, where the equation is written, expanded and finally solved. We are the virtual blackboard where our clients know that every document, folder and footnote is confidential, that all exchange of information is secure and that we are ready to assist you and your team to get the job done.

Through our efforts I am proud that our clients have consistently vouched for Vite iRooms by using our Virtual Data Room service. More importantly I am proud knowing that our service has helped them achieve their goals in a fast and efficient way.  As all of you know we spend a great deal of time evangelizing  the virtues of Virtual Data Rooms and now this trend has become  a two way street. Our clients have come to us with new ways to use the various features in our Vite iRooms offering for a host of different projects. We are excited about the growth of Vite iRooms and appreciate the endorsement.  As my team and I thrive on your feedback, feel free to contact us anytime and we will be keeping you updated, so watch this space!

Thanks for reading and do let us know your thoughts!

Spencer.

spencerchiu@toppanleefung.com

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