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Data Room for IPO - Get Ready Using This Guide

Kison Patel
Kison Patel

Kison Patel is the Founder and CEO of DealRoom, a Chicago-based diligence management software that uses Agile principles to innovate and modernize the finance industry. As a former M&A advisor with over a decade of experience, Kison developed DealRoom after seeing first hand a number of deep-seated, industry-wide structural issues and inefficiencies.

CEO and Founder of M&A Science and FirmRoom

The IPO process is extremely complex.

There are certain requirements that have to be met before a company can consider going public; the company must have predictable and consistent revenue with enough funding for the entirety of the IPO process, continuous growth potential while performing at the top of their industry, strong leadership and business processes, and a low debt to equity ratio with a long term business plan.

While this may sound like a lot to coordinate with all of the necessary parties involved, the use of data rooms, such as FirmRoom, has been extremely beneficial for companies when streamlining the IPO process and ensuring continued success in the transition from private to public.

Going Public via IPO  

Going public refers to a company’s initial public offering, or IPO, and becoming a publicly traded entity.

Becoming public generally helps a company’s hopes of expanding by increasing prestige and helping to secure more funding to invest in future operations or acquisitions.

Before a company decides to undergo this complex process, however, various requirements set out by the underwriter must be met.

The process usually starts by contacting an investment bank, and once a stock goes public, the company becomes subject to the Exchange Act reporting requirements, necessitating them to file a registration statement.

If they fail to do so, their designation on the stock exchange may be removed, and the process will begin again.

How do Companies Leverage DataRooms for IPOs?

This all sounds like a lot of steps to take in order for this change to be made. At this point, you’re probably wondering, where would data rooms come in, and how could they possibly help me?

your pathway to ipo readiness

Easier Due Diligence Process

Due diligence is the process of gathering and providing information about a business or its assets that is necessary to start the IPO process.

It must be done by the issuer, its business, and any other parties involved in issuing shares. With the use of a data room, as provided by FirmRoom, it is possible to synchronize all processes involved with due diligence, including diligence requests, communication, and document management, all in one place.

This eliminates any issues that may exist before the company opens to the public. Many data rooms, including FirmRoom, have an IPO diligence template to outline all of the information necessary and allow the collection of that information inside the platform.

This makes it possible to complete requests in half the time and easily track the process while eliminating any duplicate work as any documentation updates are shared in real-time.

Easier Investor Communications

Throughout the IPO process, multiple external parties, including auditors, underwriters, and potential investors, must have access to all of the data, such as documentation and financial information.

 Investor Communications via dataroom

Before data rooms existed, these parties would meet in a physical data room at one location in order to review secure information, which was often difficult to coordinate if all parties were located at various locations across the world.

With the use of a virtual data room, all of the data required for IPO preparation can be uploaded to the data room for those who need to work on it. For example, the in-depth analytics offered by FirmRoom allows all of the parties to work on the documents at the same time, as well as monitor the progress through the diligence process and respond to requests in a timely manner.  

Efficient Workflow

By using a data room, all reports can be collected and centrally stored, creating an organized space of information from the beginning of the process.

Virtual data rooms also keep track of all changes made, so it is evident who did what and when they did it. This keeps the process moving at a good pace and allows for a smooth, traceable workflow.

FirmRoom also allows uploading and updating of multiple files in a bulk format, with secure collaboration. This automates the process of project management capabilities, assignment of responsibilities, and team organization while tracking team performance in real-time.

Facilitation of Dual Track Processes

Something important to also discuss is IPO dual-track processes.

This is defined as the combination of an IPO and an M&A exit, where the company goes public and is then acquired. FirmRoom’s data rooms are designed to support the dual-track process, as it is possible to evaluate the feasibility of every outcome based on analytics.

It is also possible to prepare for an IPO while privately negotiating with other large investors by sharing the same information with multiple sources without their knowledge in live time with designated access.

Further assisting with this process is the ability to manage documents in one secure place, as with FirmRoom, documents can be organized and managed with drag and drop uploads and smart notifications.

Strong Data Security

In the matter of IPO, data security is of the utmost importance.

If information were to become public before being approved, the SEC could decide to decline the IPO request. Using FirmRoom, it is possible to assign specific access privileges based on the role of the person and what they should be allowed to see based on their responsibilities.

This allows those involved with the company itself to make changes to the documents while restricting those outside the company to view only access.

Solves Common IPO Software Challenges

Data rooms are made to solve any technical issues previously faced by companies going through the IPO process.

The incorporation of version control and Excel trackers eliminates the need for use of other software which may introduce confounding variables. All communication can take place within the platform, eliminating the need for drawn-out email communication and possibly overlooked documents.

FirmRoom also offers flat-rate pricing plans, including unlimited data and no overage fees, to solve the problem of costly software.

Above all, FirmRoom provides the easiest platform to use.

Why Do Companies Going Public Choose FirmRoom?

Well, because our solution is the best!

But what makes FirmRoom different?

Customer care

At FirmRoom, we pride ourselves on a high level of responsiveness and overall care in addressing issues or concerns as they may arise. FirmRoom offers 24/7 customer support via online chat, call, and email.

Unlimited potential  

Our virtual data rooms at FirmRoom are not limited to the capabilities that they are originally designed for. Our team works with customers to build extra functionality as requested where possible.

We also offer unlimited storage and unlimited users, eliminating any logistic issues with a large number of users and documents.

Industry-leading security features

At FirmRoom, we offer SSO, or single sign-on, allowing a user to securely authenticate with multiple applications and websites using one set of credentials. This means that you only have to log in once but maintain the same level of security.  

We also utilize Amazon web service data centers, with the highest levels of security in cloud infrastructure. Not only that, but we also offer industry-leading security features to control access, editing, and downloading of documents using permission settings and audit logs.  

Smart analytics

With the smart analytics at FirmRoom, it is possible to track every step of progress throughout the IPO process, streamlining the process and controlling it with synchronization.

Comprehensive due diligence solution

Comprehensive due diligence solution

Due diligence can be one of the major roadblocks during the IPO process.

At FirmRoom, we have created a due diligence folder structure built into the platform, incorporating all of the necessary steps and information needed to move forward.

Using this folder structure, it is possible to track the progress and secure all necessary documentation.

A basic example of this checklist would be as such:

  • Legal
  • Commercial
  • Financial
  • Human Resources
  • Intellectual Property
  • Information Technology
  • Environmental, Health, and Safety
  • Tax
  • Marketing
  • Compliance and Regulatory Matters

Each of these sections would contain more specific information pertaining to your company, with this as an organization guideline to help make the process of going through due diligence more approachable.

And if you have a preferred pre-made folder structure template, you can upload it into the room.

IPO Preparation Using Data Rooms

As discussed, the use of virtual data rooms, such as FirmRoom, has the potential to largely streamline the IPO process.

Overall, the use of virtual data rooms helps to organize a structured, controlled, secure process and reduces the preparation effort needed from all parties, making the IPO process much quicker and more efficient.

Preparing for an IPO

The IPO process is one that has to be meticulously documented and organized.

With the use of a data room, documents can be managed efficiently. FirmRoom offers a wide range of tools for effective document management, such as real-time document analytics and full control of all document privileges.

To help you prepare, check out this 6-step IPO readiness guide.

Enhanced documentation

With FirmRoom, users can redact certain text within documents and files.

Users can type in the text they want to be redacted and even see a preview of it before applying the changes. This accelerates the IPO process and ensures documents are in the appropriate format.

Specific data sharing

At different stages of the IPO process, the data room may be utilized in different ways. This includes underwriter communication, due diligence, risk management, and capitalization.

At FirmRoom, our team can help you set up an investor-specific data room, including the key elements of a business plan and marketing materials, intellectual property, financial statements, sales and marketing, technology, and management information.

Real time analytics

real time analytics

As previously discussed, FirmRoom offers detailed analytics in real-time that show the activity of all users.

While this is a security measure in terms of making sure that only the intended recipients have access to the information in the data room, it is also helpful to review these analytics to see which files investors have accessed the most frequently to see which are most useful and store that information for future deals.

Internal document management

Documents can be continuously managed and shared for all aspects of the company using FirmRoom’s data room.

Information can also be shared with investors as it is needed. Further, if another deal were to be in the works, all of the documentation and information from the previous process will be stored, making the process quick and easy.

Post IPO benefits

Even after your company has completed the IPO process and has become public, FirmRoom saves all documents and communication, allowing the ability for continuous due diligence by investors and the SEC.

It is also possible to upload additional documents as needed.

Putting it all together

As you can see, virtual data rooms such as FirmRoom are necessary for the most efficient IPO process.

FirmRoom has helped numerous  companies, such as Raymond James Financial, Fox Rothschild, Duff and Phelps, and Moss Adams by working alongside them with high quality assets and dedicated customer support to ensure their success ingoing the public.

With this information in mind, you can rest assured that FirmRoom is the best software provider decision you could make to ensure a successful IPO. Start your free trial today!