How virtual data rooms help during an IPO?

The larger the organization, the more it needs tools for competent and convenient work with sensitive information during business transactions. In this article, we will analyze the role of virtual data room software in IPOs deals.

What is an IPO deal?

Companies that have earned a certain business reputation in the market, as well as having a good amount of capital, maybe thinking about expanding their business. As a rule, many in such cases take loans from banks secured by the property. More ambitious organizations go public, issuing their securities and attracting new investors. The method of financing a business through an IPO is a risky but promising undertaking that will make it possible for both the issuer of securities and investors who decide to invest in a “newcomer” on the exchange to earn money.

The initial public offering (IPO) is a method of raising capital through the sale of shares in the public market. The complexities of the securities placement process are as follows:

  • business valuation;
  • due diligence – an independent collection of objective information about the investment object;
  • the need to disclose information;
  • provision of audited financial statements.

The process involves underwriters represented by investment banks who evaluate the company and prepare the prospectus. There are also requirements for the number of independent directors on the company’s board of directors or, for some businesses, for a minimum revenue for the last financial year.

In general, to go public, a company must have a transparent, from a legal point of view, ownership structure, as well as high standards of information disclosure,

Virtual data room in the IPO process

The documentation of the IPO transaction is seen as something valuable that belongs to a certain group of people, in which no one is allowed to assist. Therefore, based on all the needs of those entrepreneurs and the query resulting from this matter, a reliable platform was invented. The data room is the essential component of the due diligence process.

Besides, the use of various data room functions, such as the Q&A area, dashboards, and the release of documents, helps to create the best collaborative workspace for efficient work and execution of the IPO. The basic functions of the data room management system include:

  • Unified complex database of documents;
  • General base of contacts and electronic correspondence;
  • Ensuring an automated system for monitoring contracts and invoices;
  • Control over the execution of instructions on files;
  • Systematization of work with counterparties;
  • Bringing documentation in order;
  • Safe access to documents;
  • Easy and fast information search;
  • Automation and control of the stages of the IPO process.

Automation of contract accounting allows you to enter templates into the system and use them to create contracts of the same type. For example, if you add a template once and specify in it a set of labels that will be inserted into its text when printing or downloading, then preparing a new contract with a client may take only a couple of minutes instead of half an hour.

An important element in the use of data rooms is to ensure the security of data of both the management process and the client base, because in the middle of the software if it is hosted on a separate server, they are in a secure environment. Another important tool of the organizational aspect of the implementation of data rooms is a visualized “kanban” system of sales, which allows you to “digitize” sales processes, track the stages of the agreement and financial expectations.