Share and business transactions, private equity investments and other capital market-related transactions are constantly becoming more international and complex. And the expectation is also that the deal should be done without interfering with the normal business of the parties involved. Being able to carry out efficient due diligence is one of the most essential elements of a transaction. A virtual data room makes the due diligence review straightforward and effective.

Krogerus provides its clients with the option of a virtual data room system for due diligence, the first law firm to do so in Finland and the Nordic countries, a possibility to use a virtual data room system for due diligence. The system has been created by the firm to serve this particular purpose. By means of its own virtual data room capability the transaction process can be made without an outside service provider. The system is provided in two languages, English and Finnish.

The virtual data room service accelerates and simplifies the transaction process. It can enhance the transaction process even in small transactions,
but the benefits of the room are substantial in transactions involving several potential buyers when these parties can conduct the due diligence review at the same time. So the time required by the due diligence process is reduced dramatically.

In large transactions, where the target company has offices in several countries, the due diligence process can be cumbersome and expensive. The fact that the data room is open around the clock and that the virtual data room is accessible through the internet around the world, can make the virtual data room superior compared with traditional data rooms.

The limitations of physical facilities do not cause any inconveniences, and separate data room supervisors are no longer needed. As the virtual data room is easy to use and navigate, the lack of experience in similar technical solutions does not cause difficulties. After completion of the transaction, data room material can be stored in escrow and the vendor receives the material on CD or DVD.

The service is used through an encrypted connection and all documents in the service are also encrypted. The user will need a username and password in order to log into the system and open the documents. Every user has to accept the disclaimer at the first log-in. Required usernames are sent to each registered user separately by email when a project is launched. A watermark that shows the username and the date when the document is opened is always printed on a document. The top administrator may control each user group's viewing and printing rights document by document, and is also able to control access to the virtual data room in the most extensive way possible, even making increasing amounts of data available as the deal progresses to the next stages.

Benefits for the vendor

The firm tailors the virtual data room services to suit the client's needs, as the service covers the maintenance and processing of the due diligence material in the system, project management and customer support. If necessary, the firm also provides scanning, arranging and indexing services of the due diligence material. Alternatively, clients can deliver the material in digital format or upload the material to the system from their own workstations.

The entire data room process can be operated through the virtual data room system in real time. The material can be uploaded by the client electronically throughout the due diligence process. Thus the adding and reviewing of additional material can be made without special arrangements. Furthermore, questions and answers relating to the due diligence material are processed digitally. Processing of information requests will be substantially accelerated, when questions can be made in real time and answering is convenient through the system.

As the cost effectiveness may enhance the buyer's ability and willingness to participate in the process, the probability to receive offers is higher. Higher competition between the buyers can also mean more reliable price formation.

Customers and its other advisers may also trace the visits and reading activity of the material through the system.

Benefits for the buyer

The digital service provides significant cost saving to the buyers, since the due diligence review can be conducted without travelling from one place to another and digitally, regardless of the time and place. The cost effectiveness may decrease the threshold to make an offer and respectively increase the buyer's ability and willingness to participate in the process.

Since the data room is not limited to physical facilities, unlimited numbers of people can conduct the due diligence at the same time. Thus, the buyers may easily ensure that all directors, employees and advisers can review all the relevant documentation.

Kati Mattila is a partner at Krogerus in Helsinki.