Sep 29, 2016 - to set up, save time and expenses, and make administration easier .... down and created a business plan f
HOW TO MANAGE AN EFFICIENT & EFFECTIVE DATA ROOM
Harish Kumar, Manging Director 29 September 2016
IMPORTANCE OF DATA IN THE DEAL PROCESS Effective and efficient information sharing is critical to the deal process. The main attributes of a proficient information sharing process are data accuracy, preparation, speed and safety, as these will minimize potential risks for the buyer.
Data accuracy bridges the bidask spread by removing uncertainties and unknowns in a potential transaction
Preparedness plays a critical role in a sale transaction to attract investors, since due diligence is an expensive process
An efficient data sharing and storage facility should be easy and fast to set up, save time and expenses, and make administration easier and safer
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DATA ACCURANCY: COMMONLY FACED DATA ISSUES (1/2) Data accuracy can be proven as one of the most challenging aspects of the deal process. Challenges in data accuracy will vary depending on the seller’s commitment to proper information capturing, management and storage. Key data issues to address
Incomplete or missing system data and/or documents Discrepancies between loan documents and data tapes Issues with collateral data, valuation methodology and definitions Issues arising form non-compliance with regulatory requirements Lack of historical data or track record Frequent changes to policies and procedures
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DATA ACCURANCY: COMMONLY FACED DATA ISSUES (2/2) Empirical experience has highlighted several issues with regards to data quality and accuracy that are commonly faced during a deal process. Prompt identification and management of such issues will minimize their potential impact on the deal. Key data issues to address (c’ntd)
Multiple data-sources, with non uniform approach and inconsistent data between them Legacy systems may not support the information required for a complex analysis Manual data input is not performed in real-time, data-tape info vs current portfolio status may differ Data input and maintenance is commonly performed by nonspecialized resources (“garbage in-garbage out”)
Handling sensitive data creates increased costs and complexity (secure storage etc.) No single data owner, creating delays and increasing complexity in data collection 4
DATA ACCURACY & REMEDIATION Once identified, information gaps and discrepancies should be rectified in order to minimize the cost, time and risks attached to the buyer’s due diligence process.
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DATA PREPARATION & OGRANIZATION Prior to sharing with the prospective buyer, data should be prepared and organized according to the deal’s needs and characteristics. Virtual Data Rooms (VDRs) have become the industry standard for information sharing, as they facilitate for a well-organized, safe, time and cost efficient information sharing environment. VDR set up The quicker a VDR is set up and operational with all documents uploaded and organized the sooner the due diligence process can begin. Therefore, data room set-up should be considered as one of the process’ initial steps
Organizing Documents Deal documents should be well-organized and named An effective document index is consider critical A staging environment is a best practice whereby folder structures and files can be easily organized and renamed before they are uploaded to the data room 6
DATA MANAGEMENT DURING THE DEAL PROCESS Protecting Documents Assign the proper rights and protection levels to the correct people and provide credential protected access Protection levels can range To eliminate issues with document formatting and printing, convert documents into PDF format
Managing Participants Throughout the deal, users are added/removed and user permissions change Wizard-like tools allow to easily and quickly add and remove participants and apply document access rights
Accessing Remotely Managing a VDR can be a 24/7 job, especially if potential buyers are located around the world
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DATA SECURITY The nature and sensitivity of the information shared during a deal process command for a secure environment. Data security is of key importance to any deal process and a safe data room should account for specific attributes.
Data encryption Account theft and antivirus protection Remote data wipe Digital rights management (DRM) Two-step authentication
A safe data room
Several ways of document protection Access and activity tracking
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KEY LESSONS LEARNT & BEST PRACTISES (1/2) Key Lessons
Data Room best practises
Key Lessons
Data quality Accurate, complete and up-to-date system and document data is critical. Returns on investments in improving data quality are very high. It also shows the commitment of the seller for a successful transaction
Data accuracy Preform data integrity checks and have internal challenge sessions for completeness and robustness of information that will be disclosed during a sale process
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KEY LESSONS LEARNT & BEST PRACTISES (2/2) VDR best practices
• Easy-to-use interface and functionality, drag & drop files and folders
• Document index and search functionality • Staging environment • Local, network, thumb drive and email file access • Multiple access right • PDF converter
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Questions/Comments
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HARISH KUMAR
Managing Director, Financial Industry Advisory Services
Harish Kumar is a Managing Director with A&M’s Financial Industry Advisory Services Practice. He brings more than 18 years of experience in financial advisory, corporate planning, operations management and turnarounds. Mr. Kumar has played a key role in a range of restructuring and performance improvement projects in Asia, Africa and Europe Recently Mr. Kumar worked on restructuring and loan portfolio review of € 1.5b international portfolio of a large Southern European Bank spread over five countries in the CEE/SEE region across multiple asset classes. Work included assessment of adequacy of the provisions, segmentation of the portfolio for sale and internal work-out, bottom up business plan and scenario analysis Earlier, Mr. Kumar helped Spanish government with design and implementation of Asset Management Company ( SAREB) to receive problematic assets from various participating banks. He was responsible for defining and evaluating target operating models and organization design.Prior to that he assisted a large Spanish bank with divestment plan for a nearly €40b, mainly real estate, portfolio Prior to that he assisted a leading bank in the Central Europe with restructuring of nearly € 8.6 billion Troubled Loans Portfolio spread over 11 countries in Central and South East Europe. Mr. Kumar assisted with creation of a separate entity for wind down and created a business plan for an orderly portfolio wind down. He also assisted with restructuring and interim management of large exposure loans. Prior to that, Mr. Kumar assisted the National Asset Management Agency (NAMA) with valuations to facilitate acquisition of loans from the participating financial institutes in the Republic of Ireland Earlier Mr. Kumar worked on the Lehman Brothers Holdings International (LBHI) restructuring project where he was part of the A&M team managing $1.6 billion portfolio of NPLs, real estate, private equity and listed securities in Asia In addition, Mr. Kumar has led/assisted several PE clients with portfolio DD work in Europe and Middle East. Recent assignments included credit DD and estimation of expected losses for a portfolio in Poland, Leasing portfolio review in Czech Republic, Credit DD in Romania, NPL portfolio review in Italy consisting of consumer as well as corporate/SME loans, RE portfolio in Malta and interim management for an investee company in the Middle East Prior to joining A&M, Mr. Kumar worked with Coats Plc. (owned by the Guinness Peat Group, a diversified investment holding company with around $ 1.5 billion shareholder’s fund) as a part of their corporate strategy team Mr. Kumar earned a bachelor’s degree in engineering from the Indian Institute of Technology, Delhi and a post-graduate diploma in business administration from Indian Institute of Management, Kolkata. He also holds a CFA charter from CFA, USA and a CAIA Charter from the CAIA Association. A UK national, Mr. Kumar is fluent in English and Hindi
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