Driven by the COVID-19 pandemic and the resulting economic slowdown, millions of jobs have been lost across the U.S. and around the world. Businesses of all sizes and in all industries are facing tough decisions about how to stay afloat, deliver for investors and be best positioned for the long term.
If you turn on CNBC or read the Wall Street Journal these days, the word that’s on the top of everyone’s mind is “restructuring.” In early August, Disney announced a $5 billion restructuring and impairment charge during their quarterly earnings call. Cisco, the technology giant, announced a $900 million charge and expects significant layoffs from its 75,000 person staff. The situation repeats itself at Deutsche Bank, Pfizer, Harley-Davidson and so many more. Even more visceral, perhaps, are the store closings, liquidations, bankruptcies (whether Chapter 7 liquidations or Chapter 11 restructurings, some of which file a second time, known in industry parlance as “Chapter 22” cases) and “Going out of Business” and “Everything must go” signage festooning malls, strip malls, and shopping promenades around the country.
In each of these situations, members of these companies administration, legal and finance teams (as well as lenders, retained professionals, the retained professionals of counter-parties, etc.) will need to review thousands of documents to ensure they are best prepared to successfully announce and implement a restructuring program. They’ll also need to negotiate directly with creditors, bondholders and lenders to streamline balance-sheets, operations and help them meet new goals, which are often a moving target. But, they need to do so in a safe and secure environment, helping to ensure employee and business information is protected and that word doesn’t leak out before the company formally announces plans, or prepares to transfer such data and Intellectual Property to a new owner. Under normal circumstances this can prove challenging; layer on the fact that most people are telecommuting due to COVID-19, this presents a whole series of other issues. This is where a virtual data room (VDR) can make all the difference.
So let’s take a look at some of the major benefits a VDR can provide for the development and implementation of a restructuring plan.
- Reduces Preparation Time: Timing is critical when it comes to an effective restructuring announcement and deployment. Should a restructuring become the necessary outcome of financial challenges, every day in which a new path forward is delayed, the impact on the bottom line is compounded. With a VDR, teams can work together in a structured and secure manner to determine what makes the most business sense, what the impact of each option is and how to proceed going forward. SmartRoom, one of the leading VDR providers, is designed to save time. It offers integrations with cloud storage systems like Box and Outlook, enabling users to directly upload files into the VDR. No time-consuming downloading and then uploading required. It also offers the proprietary SmartDrive application that allows users to work with SmartRoom content from the convenience of their desktop.
- Streamlines Due Diligence and Auditability: When it comes to due diligence and auditability, there’s no substitute for having documents in order. This is where a VDR like SmartRoom makes all the difference. It offers notifications and alerts on who is handling what documents and when. The proprietary SmartLock feature let’s you set time limits on data accessibility and remotely detonate documents even after they have been downloaded. Plus there’s the advance reporting features and dashboards that track every user and document activity.
- Security and Compliance: Data breaches are all too common these days. Whether they are phishing expeditions, cyber attacks or viruses, these types of attacks can compromise critical company information and employee data. And worse yet, they can grind company operations to a halt or even be used as part of a blackmail scam. VDRs all but stop these criminals in their tracks thanks to multi-level authentication and bank-grade encryption.
- “Need to know” basis: Sharing HR information with a prospective buyer, due-diligence party such as a lender, private equity or angel investors may be necessary, while the same information is best withheld from a strategic competitor who may be interested in simply learning as much as they can about a competitor. Additionally, an advanced VDR such as SmartRoom with granular user rights could protect salary information from people WITHIN the company who are not cleared to see their co-workers data, whether within a restructuring endeavor, or not, while outside professionals can manage the same information without those considerations. Consumer-grade platforms, or internal SharePoint or intranet can’t offer this capability.
- Streamlines Communication: With most people working remotely because of the pandemic, a system that organizes thousands of electronic files is crucial. VDRs offer precisely that. They help avoid the chaos and confusion resulting from a string of emails. Users will never have to worry about multiple drafts circulating around and wonder which is the right version of a particular document. VDRs like SmartRoom centralize files creating a single source of truth. Plus it records who accesses these files and notifies all involved of relevant updates. This eliminates confusion, double work and wasted time. Additionally, VDRS like SmartRoom offer a DocuSign integration, which handles contracts and non-disclosure agreements all securely within the data room.
- Reduces Costs: Time is money. Time will always be money. And during a restructuring, time and money are things that companies generally have limited amounts of. VDRs are designed to keep costs down because of the time savings and efficiencies they deliver. Savings are passed on to both the internal team, as well as for hourly billed professionals whose time is better spent than in a document chase, anyway.
Learn more about how SmartRoom’s virtual data room can help your business.