Holodeck Deals: Conducting M&A In the Virtual World

Would you complete a business negotiation on the holodeck, as is used in Star Trek? Intralinks is doing just that with Virtual Data Rooms, and so far, these "virtual worlds" have been the platform for $23.5 trillion dollars worth of deals done in corporate finance and strategic M&A.

Let's examine the situation. The investment banking world deals with critical and confidential information, often requiring excessive travel to meet and get deals done in person. To alleviate the need for often-onerous travel and frequent face-to-face business meetings, SunGard Availability Services customer Intralinks created Virtual Data Rooms (VDRs), a SaaS offering which are highly secure collaboration spaces for dealmakers to share information. Given the sensitive nature of the data, as well as time sensitivities “an hour lost on a deal can lose a transaction,” says Matt Porzio, VP Strategy and Product Marketing at Intralinks. "VDRs need to be secure and available 24/7."

These deals can make or break careers. “We built our system from the very beginning with two fundamental aspects – it had to be secure, and it had to only let certain people do certain functions,” said Porzio. “The second piece was that it had to always work.” Porzio has a history in the investment banking world. He recalls several instances of flying in-person and being in closed data rooms until 3 a.m. in the morning. The people involved in these deals are around the globe, and deals often involved several trips. “We didn’t want the buyers to know about one another, to collude,” said Porzio. “Deal making is dynamic – new financial information comes out, and we’d have to invite people to New York. A lot of deals lose steam because of arduous due diligence.”

Intralinks provides a virtual space to accomplish business negotiations, with the same security and peace of mind as the constant person-to-person meetings that it looks to replace.

Increased Speed and Data

“The main driver, the main benefit of the VDR is the efficiency, the time saving,” said Porzio. “These deals average well over 300 million. There’s been deals done in our VDRs from around 5 million and up. VDRs also give the ability to close these deals 30 days faster, and for sellers to get to the buyers they need.” As people grow to accept online spaces for even the most confidential of activities, it turns the market into a truly global one.

There’s also a business intelligence aspect to VDRs. “In the physical world that I used to be involved in, a bunch of people showed up, but we didn’t really know what level of diligence they did,” said Porzio. “In the virtual world, with the audibility of it, you get a sense of what buyer is doing all of the work. Our clients, bankers, say this gives them a real sense of who’s done the most work. It let’s them know who’s reviewed the data – what individuals, what lawyers have come in?  Are we going to be able to close the deal?”

These data rooms are completely user-administered. The company also offers tools for clients to create their own data rooms and create templates, if needed. "We’ve built capability to drag and drop entire folder structures and permissions on a granular level,” said Porzio. “The other thing I’ll mention that is being more broadly adopted in the global data room is questions and answers. It’s more than due diligence – that information generated sparks questions and follow ups. People can right-click and ask questions, pass it on to subject matter experts. It’s all done through the platform.”

Infrastructure Behind the VDR

Given the high security and availability needs, the company turned to SunGard Availability Services for its SaaS offering, and this relationship has grown over time. “When we were pioneering Virtual Data Rooms, we were doing maybe deal 5 deals a month. Now it’s closer to 500,” said Porzio. “We have 2.7 million users on our platform accessing 80,000 workspaces. Really about this point, it’s about the information that’s shared. Each deal has multiple Gigs of data. We’re talking about 50 terabytes of really critical data. Over time the complexity of that data has increased, the need to make that data faster has increased.”

“Some of the reasons we partnered with Sungard was that passwords and all that big data was encrypted, and the company’s track record of high uptime,” said Porzio.

Intralinks vetted several companies before deciding on SunGard AS. It was Sungard AS’ understanding of the financial industry that ultimately gave the company comfort. “It gave credibility on a global basis as well,” said Porzio. “Over time, we’ve been vigilant; SunGard has had that same vigilance."

"The scrutiny on M&A transactions has increased from a regulatory standpoint, as well as shareholder, fiduciary responsibility,” said Porzio.” “When buying and selling an asset, you leave no stone unturned. There’s hundreds of people on each one of these deals – the system can’t be down for a minute. That’s how you potentially lose a buyer.”

“Virtual Data Rooms are probably utilized in half of deals globally,” said Porzio. “We’re working on the other half. The adoption phase, and the comfort level we’ve built with people, has grown. I can’t overemphasize the importance of building trust in the market.”