When a company wishes to sell selected assets or a subsidiary, it generally uses an auction in order to obtain the highest possible price. Unfortunately, this also means that a number of bidders will ask for the same due diligence documents, resulting in a marked decline in efficiency within the accounting department, which must service many of these requests.
A relatively simple solution is to create a password-protected Web site, and store all relevant due diligence documents on that site. Once a prospective buyer has been vetted to ensure that it is serious about placing a bid, and has signed a non-disclosure agreement, then the selling company issues it a user ID and password for access to the on-line document room.
Most buyers will have similar requests for due diligence documents, such as articles of incorporation, financial statements, and copies of contracts, which the seller can anticipate and post in advance. There will also likely be a few additional document requests in addition to the standard documents, for which the seller can post additional files on the site as requests are received.
After poring through the on-line documents, bidders will likely have additional questions, for which a small group of knowledgeable seller employees can be designated to provide answers. This group can accumulate their answers into a frequently asked questions (FAQs) section of the on-line document room, thereby avoiding having to repetitively respond to the same questions from other bidders.
Finally, the seller can track bidder access to each document on the site, making it easy to determine who has accessed confidential information. This may be useful in the event of a future breach of confidentiality lawsuit.
In short, a secure on-line document room allows a selling company to provide information to multiple bidders just once, thereby greatly reducing the staff time devoted to this activity.