Due Diligence: Whose Job Is It?

PenToo often, technology companies seeking a profitable exit make the flawed assumption that the due diligence process resides solely in the hands of the buyer. This assumption can lead to fatal mistakes that can undermine value, slow the process, or even kill the deal.

The reality is, as a selling company, you have an enormous opportunity to shorten due diligence timelines and maximize the value a buyer assigns to your company. Conversely, waiting to address the rigorous demands of the due diligence process until a buyer is already at your door puts an incredible demand on you and your resources and can create the perception that you’re unprofessional and that your company may have operational difficulties.

Being prepared for the exit process means that everything a buyer will want to scrutinize—contracts, employee records, customer agreements, compliance documentation, HR and IP issues, etc.—is accurate, up to date and organized in a way that makes it easy to review. The best way to collect this documentation is by using a due diligence checklist. Due diligence checklists are fairly extensive lists of all the items a buyer will likely want to see prior to acquiring your company in order to ensure they’re getting what they think they’re getting and to avoid any liabilities that might cause problems in the future. The best way to present this information is in a well-organized, full-featured virtual data room.

Although a buyer will most likely have their own tailored due diligence checklist, don’t wait. The best approach is to begin the process now, even if you don’t believe an exit is on the horizon. Use the sample due diligence checklist provided here to ensure that everything a buyer wants to know about your company is available and organized in a secure virtual data room for easy review.

Remember, being exit-ready is not just about being prepared for the rigors of a buyer’s due diligence, but is also critical to the health and growth of your business on a daily basis.

One of the most common uses of ShareVault is for organizing important documents for review during the due diligence process. ShareVault offers high-end features and functionality that make a professional impression on potential buyers, combined with the ease-of-use and quick set-up expected by all participants in the due diligence process.

To download a comprehensive sample due diligence checklist, click here. If you would like your ShareVault pre-populated with this information, just contact a ShareVault representative at 1-800-380-7652.

Don’t Miss the BioPharm America Life Science Partnering Conference, September 22-24 in Boston!

BioPharm AmericaThe seventh annual BioPharm America™ international life science partnering conference will be held at Boston Marriott Copley Place in the center of Boston’s historic Back Bay.

Produced in collaboration with the Massachusetts Biotechnology Council (MassBio), the September 22–24 event will bring the global life science industry to Boston to facilitate strategic collaborations with leading companies.

Partnering enables biotech and pharma executives and investors to meet face-to-face to identify and enter into strategic relationships that bring ground-breaking drugs, therapies and devices to patients around the world.

ShareVault plans to be there. What about you?

Find out more here: http://www.ebdgroup.com/bpa/index.php.

Fierce Biotech Reports on Surge in Big Pharma Venture Investments in Biotech

Top Corporate Investors In Biopharma

Top Corporate Investors In Biopharma

Fierce Biotech‘s John Carroll reports on a new analyst report from Silicon Valley Bank, describing the ongoing trend of Big Pharma outsourcing its R&D to Biotechs through corporate venture investments.

In its analysis, Silicon Valley Bank concludes that the early-stage investment gamble now amounts to a strategic move by the top Big Pharma companies to outsource a considerable portion of their early-stage R&D work, priming the cash pump directly through their own venture arms as well as by investing in many of the new venture funds filling up with risk capital. And the change-up is likely to continue to drive partnering as well as Big Pharma forges a new round of development pacts and M&A deals with their venture colleagues involved in biotech.

ShareVault has been enjoying increases in both partnering and M&A deals, which are both important drivers for our continued growth. The article also emphasizes the importance of oncology drugs…

Not surprisingly, experimental cancer drugs are attracting the bulk of Big Pharma’s attention and corporate cash.

 … Which is why ShareVault has decided to Partner with BIO (Biotechnology Industry Organization) to organize a live web panel, chaired by Linda Pullan, on what’s hot in Oncology partnering. Stay tuned for our full announcement later this week of this exciting web panel!

Types of Successful Acquisitions

While every company involved in a merger or acquisition endeavors to ensure that it will be profitable, many of these transactions are not as successful as the companies involved would have liked. Certain companies that have been through multiple acquisitions, such as IBM, Cisco, Johnson & Johnson and SABIC, have used their experience to perfect strategies for successful acquisitions . In order to prepare for a successful M&A transaction and create future value, companies would be wise to follow the example set by these companies in order to develop effective strategies of their own.

Common Problems in M&As

Both before and after a merger or acquisition, companies are frequently unsure of exactly how to maximize the value of the acquisition. In some cases, skills and technologies required for a successful transaction are not mastered quickly enough, and the company’s revenue suffers as a result. In other cases, companies are simply unaware of how to create value following the transaction.

Creating Value

In order to maximize the creation of value from the transaction, companies need to use time-tested strategies that other experienced organizations have discovered. Companies should analyze, evaluate and compare a variety of strategies and their possible effects. In general, the acquiring company’s rationale for the transaction should align with one of the strategies below:

1. The merger or acquisition should improve the performance of the target company.

Acquisitions with the goal of improving the target company’s performance can be successful, especially if the company has low margins to begin with. This type of acquisition usually involves margin improvement through reduced costs and is common among private equity firms.

2. The merger or acquisition should remove excess capacity from the industry.

Combining mature companies with recent entrants can reduce excess capacity within an industry, thus leading to better productivity. In most cases, this type of acquisition is most beneficial to the seller’s shareholders.

3. The merger or acquisition should accelerate market access.

In many cases, small companies don’t have the resources necessary to promote and distribute their products efficiently. Acquisitions with the goal of accelerating market access can solve this problem by combining a larger company’s expansive resources with the innovative products of a smaller business.

4. The merger or acquisition should decrease costs related to skills and technologies.

Some acquisitions are successful because they give the acquiring company access to needed skills or technologies. These transactions are most successful when they reduce the cost or the time involved in obtaining these assets.

5. The merger or acquisition should help winners develop their business.

A final type of successful transaction involves identifying a company that has potential when it is early in its lifecycle and acquiring it before it achieves growth. This type of acquisition allows the acquiring company to cash in on the potential of the smaller business.

Simplify Acquisitions with ShareVault

Regardless of your goals for an acquisition, a thorough due diligence process is essential to the transaction’s success. ShareVault provides a secure, cloud-based solution that allows companies to share confidential corporate data with potential acquiring organizations. ShareVault is consistently ranked as extremely secure, user-friendly, easier to deploy, and more cost-effective than its competitors. In addition to offering bank-grade security and granular document access control, ShareVault offers detailed reporting of who has seen which pages of which documents, when, and for how long. Thousands of companies have used ShareVault in 45 countries worldwide facilitate more than $25 billion in deal transactions. Visit http://www.sharevault.com today to learn more.

Tips to Succeed After an M&A

Due diligence has been completed, all of the documents have been signed and the money has been transferred, but the M&A process isn’t over yet. Even after meeting all of these milestones, you will still face certain challenges as the company eases into new ownership. Anticipating and preparing for these issues in advance will help make this transition as painless as possible.

Preparing for Success

To understand the best way to prepare for the aftermath of a merger or acquisition, think about some of the companies that have done well after an M&A. What qualities do they share? In general, these companies have three things in common:

  • Strong leadership.
  • Clear, open communication.
  • Gradual changes made in the best interest of the company.

In many cases, organizations that are negotiating a merger or acquisition don’t stop to think about what will happen after the deal is done, and those organizations that do anticipate problems often focus all of their attention only on legal and financial issues. However, you may face a variety of other challenges following a merger or acquisition, including the loss of key personnel, low morale and other employee-related issues.

Damage Control

The most effective strategy for dealing with these issues involves planning for them long before you even begin the due diligence process. For best results, anticipate any issues that could occur after the M&A is complete, and formulate a plan for resolving them and/or minimizing their negative effects.

For example, to make the merger/acquisition easier on the staff, maintain open communication with employees throughout the M&A process. Let employees know how the potential merger could affect them, and allow them to voice any concerns they may have about the process. Do your best to make sure that all employees feel comfortable asking questions and sharing their concerns. Respond to their feedback with compassion and understanding. Determine in advance who will take on which roles after the companies merge, and make employees aware of your plans.

A Smooth Transition with ShareVault

M&A deals enjoy greater success when the organization negotiating the deal gains a thorough understanding of the long-term impact the M&A will have on employees and stakeholders alike. In most cases, this understanding comes from effective due diligence. ShareVault simplifies the due diligence process by allowing organizations to share confidential corporate information with potential partners in a secure environment.

ShareVault has demonstrated that it is a leader in terms of its ease of use, speed, security and reliability. With ShareVault, you can maintain all of your corporate documents securely in a single cloud-based location while still retaining control over who can see, save and print each of the documents in your database. ShareVault also allows you to monitor all users’ behavior so that you know who views each page, when it was viewed and how long it was open. What’s more, ShareVault even allows you to revoke access to documents even after they have been downloaded to an end user’s device or computer.

Long-range planning is essential for M&A success. ShareVault facilitates thorough, effective due diligence so that you can make the right decisions during every phase of the M&A process.

Real Estate and M&A Deals

As the economy has improved and credit has become more readily available, mergers and acquisitions (M&A) are on the rise. Many business owners, however, may find themselves unprepared to participate in this resurgent environment. Those business owners who want to be prepared for a potential merger or acquisition should spend the time to reevaluate what factors drive their business’s growth, revenue and costs—and in turn, profits—especially in the changing business climate following the economic downturn.

Though they are often underestimated, a business’s real estate concerns are an important factor to consider while preparing for a potential merger or acquisition. In the course of valuing their business, owners may consider the value of owned real estate assets, as well as their real estate liabilities (such as a lease or loan balance). However, there are other aspects of real estate that they may easily overlook.

The market value of their real estate assets may be much higher than the actual price at which they could sell them on the market. If the location of the business is especially advantageous for their particular business, and difficult to find elsewhere, an acquiring company may pay much more than the market value.  For example, a restaurant that has been located at a certain location for many years may not do as well if relocated. Similarly, a business that is located in a part of town where its ideal customers walk or drive by frequently may also sell for more than the value of other similar structures nearby.

Liabilities may also be lower than they may first appear. For example, a buyer may be more willing to pay a higher price for your business if you have locked in a long-term lease at a favorable rate. Or you may be able to roll over a loan at a low interest rate.

In addition to putting thought to the value of your real estate in advance of a potential M&A deal, it is also crucial to organize all of the documents that are instrumental in demonstrating the full value of your business. If business owners prepares these documents in advance, they will have more leverage in negotiations should an M&A offer materialize, and they are in a much better position to attain the highest possible selling price for their business.

The best way to organize documents for due diligence analysis is in a cloud-based repository that is not only extremely secure, but also easy to use. If you store confidential documents within an organized file structure that also allows you to tag each document with appropriate descriptions, it will make it much easier for potential partners or acquirers to find what they are looking for, and you can restrict access and the ability to print and save to only the people you select.

Moreover, you ideally will be able to identify exactly who has viewed which documents, when they viewed them, and for how long they viewed them, in order to understand which buyers are most interested and why they may be interested on the one hand, or concerned about certain issues, on the other.

With more than 1,000 companies that have trusted its secure document sharing solutions, ShareVault has facilitated billions of dollars in successful deal transactions. ShareVault combines the speed and simplicity of a cloud-based document sharing solution with the security and reliability of a virtual data room.

Prepare yourself early for a potential M&A by taking accurate measure of your assets and liabilities—real estate included—and by organizing all of the documents a potential acquirer would want to see before the offer comes along.