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Investors look to the cloud to improve deal flow management and due dilligence

(Image credit: Image source: Shutterstock/bluebay)

Investment deal making is a complex process and the flow of potential deals requires deliberate and structured management. The market is made up of a vast number of deals that are interesting to many parties, both on the buy and sell sides. The challenge facing both organisations and individual investors is to identify the best deals for them and to efficiently bundle and share their deal knowledge.

Investment specialists, financial experts and business angels all need a clear and immediate view of all market prospects and the ability to manage the flow of investments on a daily basis. Once an asset manager or investment professional identifies an opportunity, there are several steps to move through, including asset analysis, investment committee audit and due diligence to better estimate the value of the asset.

With competition to be involved in the most lucrative deals as high as it has ever been, it is important for investors to have all relevant information as accessible as possible, including via a mobile device. This allows investors to make the right decisions and also to help nurture and grow their investment networks. To do all of this efficiently, clear format of information and distribution in structured processes is essential.

I have specialised in providing technology for the investment life cycle of an asset for more than 15 years and my experience shows that poor preparation in the management of the deal flow process including the complex tasks involved in due diligence can be detrimental on several levels: loss of time, loss of money or even cancellation of a transaction.

I believe that those involved in a deal are looking for five core things in the deal flow process, leading to the ability to:

1.       Take a structured approach, including access to deal information in one centralised deal database
2.       Share opportunities with colleagues, partners and clients on a global scale
3.       Strengthen existing relationships and nurture their networks by offering enhanced access to interesting opportunities
4.       Facilitate more deals, by being transparent so that the matching of buy-sell sides is improved
5.       Automate regulatory requirements and the highest levels of security such as Transport Layer Security (TLS) data encryption and user verification and certified data protection

The management of the deal flow is only one part of an investment’s lifecycle that must be managed. Often what adds to the complexity of a deal is the finalisation process or due diligence. While investors need to manage how they view, find and approach deals, overall asset evaluation and assessment to verify whether the acquisition can actually go through is equally complex.

Answering the industry's real needs

The due diligence process has been dramatically transformed over the past couple of decades. We have moved on from the point in history where data rooms were physical rooms in a building and contained all of the information required for a specific deal. These often included reams of paper documents in filing cabinets gathering dust that were difficult to navigate when finding the information that stakeholders required.

Today’s data rooms are increasingly ‘virtual’. Information is structured, managed and accessed in the cloud. The efficiencies that they have brought to the investment market are huge, with huge time savings, increased security, ease of use and a level of flexibility not previously possible.

Depending on the permissions set, stakeholders can now access information when they want, from anywhere in the world. Information can be formatted to specific requirements of different stakeholders and now as technology moves forward information can be interrogated, much in the same way as searching the internet.

The natural desire to extend these efficiencies to all parts of the investment lifecycle is obvious. However the real benefits come when the deal flow and due diligence processes are both hosted on the same technology platform. Managing an increasing amount of the investment lifecycle in one place is a benefit for everyone in the process.

The expanding use of technology in the investment life cycle is a big step toward achieving the goal that myself and my colleagues at Drooms have; to fully manage the entire lifecycle of a deal from identification, to due diligence to completion. I’m pleased to say that we are ahead of the game currently but as technology innovates so must we.

The processes of deal management and due diligence are very complex processes. The technology adopted to help the process must be up to those tasks but crucially it must be easy to use, accessible and for the most part intuitive.

If the technology is not simple and accurate then it is not answering the real need of the industry. A real-world example proving that technology is benefiting the investment industry can be seen at Illuminate Financial, an investment house based in Switzerland. Luca Zorzino, one of the firm’s investment executives had this to say about Drooms DEALFLOW, the deal flow management tool the company uses and how it is benefiting his business:

“Our partners have access to a curated flow of capital markets technology solutions that solve their most pressing challenges. The platform allows us to seamlessly share information that previously required hours of preparation. Internally it has become the focal point of discussions, ensuring all team members have access to the latest up to date information regarding prospects.”

Making a difference

This is just one example of how technology is making an enormous difference to the investment world and will continue to do so. Technology development is one of the most fast paced industries to work in, it is constantly evolving and so are the expectations of technology users.

It is up to us as technology providers to ensure our development teams are constantly looking for ways to innovate and improve. That means always striving to offer faster speeds, better security, more intelligent analytics and greater flexibility.

The goal of technology in the investment world, and indeed in other industries, in my opinion is to automate and make use of smart machines (something we are introducing into our products gradually) so that all stakeholders can spend their time on executing strategic and meaningful tasks.

I look forward to technology increasingly creating more time for investors to be more strategic and ultimately increase the volume of deals they can conduct.  This change has the potential to radically improve the economies of the world.

Jan Hoffmeister, co-founder, Drooms
Image source: Shutterstock/bluebay

Jan Hoffmeister
As co-founder of Drooms Jan Hoffmeister’s credentials speak for themselves. He graduated from the Technical University of Berlin with a special focus in the Economics of Finance, and is considered a trailblazer for the introduction of virtual data room solutions.