Sell-side M&A Process with Virtual Data Room

8 min

Every sell-side M&A company has one purpose: to ensure a flawless sale. The best, proven way to do that is to have a clear picture of the steps involved. However, sometimes that might not be enough, so owners are forced to search for ways to deal with M&A process challenges.

In this article, we take a close look at what a sell-side process is, what steps are vital for an impeccable selling process, and how a virtual data room can help deal with the most common sell-side challenges.

What is the sell-side process? 

The sell-side process is the vital part of the deal process from the seller’s point of view, including creation, promotion, and, of course, the sale. Typically, sell-side M&A advisory professionals, like banks or advisory firms, assist corporations during the selling process. Their list of responsibilities includes:

  • Creating advertising and publicity campaigns
  • Conducting a financial analysis and valuation
  • Assisting in making decisions about vital transactions 
  • Searching for new businesses to build relationships with 
  • Providing a research analysis of buy-side companies

There are dozens of reasons for owners to sell their companies. Among the most common are business distress and a lack of a clear succession plan. Often, owners might simply be tired of running their business.

One more reason for the M&A deal process is searching for new development strategies. Some owners consider joining a strategic investor as a favorable opportunity for their companies’ growth.

Sell-side M&A steps

Like zebra stripe patterns, the company-selling processes are never identical. However, there are several major stages that are necessary for a successful sale. Below you’ll find the five main steps of a sell-side M&A process and a detailed description of them.

1. Preparation 

The processes of this stage vary depending on the situation which has led to the sale. When the company owners decide to sell it, the first thing they and their financial advisors need to do is define whom they want to sell to. In other words, they need to analyze the market and choose the best buyers. 

The next step is to evaluate the business. If the company’s financial situation is not going to attract desired buyers, it’s better to put the sale aside until the situation improves. 

If the analysis shows stable growth, it’s time for the sell-side to choose the type of sale. The M&A process can be conducted through broad, limited, or targeted auction and exclusive negotiation. 

Now that the owner knows how and to whom they want to sell the company, they will start reaching out to the potential buyers. To do this, the investment bank will send the teasers to the desired buyers. Teasers are files with brief information about the company, its revenue, asset portfolio, and growth data. They can also contain photos or other visuals. 

2. The initial buyer screening 

After the potential buyers receive the teasers, those who are interested can get more details about the deal. At this stage of the sell-side process, it is important for the sell-side to get potential buyers to sign a non-disclosure agreement (NDA) to assure the seller that they will not share confidential information. 

When the NDA is signed, the sell-side gives the buyer the confidential information memorandum (CIA). This document contains detailed information about the company’s activities, valuation, and finance. 

After this phase, the sell-side is ready to receive initial bids from buyers that are interested in more details. They sign an indication of interest (IOI) in which they provide a bid range and briefly describe their “intentions” regarding the company if a sale were to close. 

This way, the sell-side gets a clear idea of whether they are beneficial. Moreover, this non-binding action helps shorten the list of buyers to only those that fit all the criteria.

3. The second round of screening

At this stage of the M&A deal process, the sell-side provides site visits for the buyers and holds meetings to discuss details. The buyers need to be informed and so gather as much data as possible before deciding whether to execute a letter of intent (LOI). 

This includes having access to the seller’s data room and attending management presentations. This way, the buyers get a clear idea of how the business will fit their corporate structure and portfolio. 

When the buyer has determined to execute the LOI, they ask the sell-side for a “no-shop clause.” This  means that the seller will not solicit, “shop for”, or consider offers from other potential buyers for an agreed period of time. Also, once accepted, the seller will exclusively provide due diligence documentation to the buyer until they have made a final decision or the LOI and no-shop clause have expired.  

4. Due diligence

Due diligence is one of the longest stages in the M&A process. As Michael Schroeder, the Vice President at Taureau Group, stated, “The due diligence process can be a fatiguing and trying time and will most likely take 60 to 120 days”. 

To conduct due diligence, the sell-side sets up a data room that stores the company’s financial, operational, legal, and administrative information. 

There are two types of data rooms: a physical data room and a virtual data room. When the company has chosen the preferred type, they give the buyer access to their room. Based on the data acquired from the data room, the buyer decides whether they will execute the LOI.

5. Negotiations

If the due diligence process goes as expected, the buyer submits their final bid. If there are no red flags during the due diligence process, the next step is drafting a purchase agreement. Before signing it, the buyer can prepare a draft copy so that the sides can negotiate over the terms. 

When the terms are agreeable to both sides, they sign the final purchase agreement. This action officially means that the M&A deal process is finished. However, this is only the beginning of implementing the terms of the agreement.

Sell-side M&A challenges and their data room solution

As mentioned above, a data room is a key element for conducting due diligence, the essential part of a successful M&A deal process. However, due diligence is not the only sell-side concern. Below are the most common sell-side M&A challenges and ways to solve them:

The disorganized due diligence process 

During due diligence, the buyer’s representatives go through heaps of information, such as the company’s financial or administrative reports. This continuous leafing through pages might not only lead to a mess of paperwork, but it also increases the chance that important documents may get lost.

However, using a virtual data room (VDR) allows storing this information in a single, well-organized place. VDRs have auto-categorization tools that can sort documentation. This simple step becomes a big advantage as buyers would appreciate the effort to make the diligence process easier.

Security concerns  

Even though the buyer’s side signs the NDA, no one is insured against accidental information leaks. If you’re dealing with physical copies of reports, it’s impossible to restrict certain people from seeing them during in-person meetings. 

VDRs not only have multiple authentication methods but also access restriction tools. This means that the confidential information stored in this repository won’t be seen unless the owner permits it.

The guesswork 

After the buyers have received the files, the sell-side cannot be sure what they are looking for in this deal. Which documents do they thoroughly study? Which they don’t even open? If the sell-side were to know the answers to these questions, the buyer’s true intentions would become clearer.

When the sell-side uses VDRs in the M&A process, they are no longer blindfolded. This software shows what documents the buyers viewed, if they are looking at the right documents, or even if they logged in. Moreover, the sell-side can use the VDR analytics tools that show each user’s activity. And if there are any issues, the sell-side can react to them immediately.


The initial stages of the M&A deal process mean showing the same reports to many buyers. This, in turn, leads to hours of printing copies with days to deliver them. However, it is unnecessary to do because a simple digital solution eliminates this issue. 

Being completely paperless, VDRs save not only time but also reduce costs. The sell-side can upload the documents to the platform only once and share them with many users without uploading them each time. It means that a few moments of uploading replace hours of printing. Moreover, uploading a file costs nothing while heaps of paper and hours of secretarial work can get expensive.

Money, money, money

In addition to the already mentioned costs, there is more spending in the sell-side M&A process. For instance, when such companies have a physical data room, it means spending money on creating a physical space to store the documents and hiring a security guard to protect it. 

However, setting up VDRs is much less expensive. Data room providers offer their selection of tools for various prices. Depending on your needs and budget, you can select the provider that best suits your needs. Fortunately, if you can’t make up your mind, you can try a free demo version to help you decide.

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