A recent private equity deal to make headlines is PE giant Blackstone’s purchase of popular sandwich chain Jersey Mike’s Subs in a deal valued at $8 billion. 

“This deal underscores the growing role of private equity in the franchising industry,” says Forbes, citing similar deals. “These deals demonstrate the ability of private equity firms to drive growth through capital and operational expertise.”

With multi-billion dollar PE deals being sealed across franchising and other industries, investors and prospective sellers must be equipped with the best tech tools to maximize profit potential while minimizing liabilities. One of the most valuable pieces of tech every buyer and seller should have in their deal-making arsenal is a virtual data room (VDR). 

Virtual data rooms revolutionize the deal-making process by giving buyers and sellers a secure place to collaborate and conduct decision-critical operations like due diligence and deal analysis. 

What features should both sides of a deal look for when choosing a VDR for private equity transactions? Before breaking down the must-have features checklist, let’s dive into PE equity transactions and what buyers and sellers should consider before solidifying a deal.

Top 5 Considerations in a Prospective Private Equity Deal

PE equity deals are typically high-risk, high-reward scenarios. With billions of dollars potentially on the line, it’s critical for all sides of a deal to do their homework and proceed cautiously. 

Here are the top five driving factors that inform the decisions of buyers and sellers in a PE deal: 

  1. Transparency, communication, and collaboration – Both sides must be willing to provide accurate financial data, negotiate effectively, and work together to achieve a mutually beneficial outcome. 
  2. Due Diligence – Both sides must perform due diligence on each other, investigating all aspects of operations to identify potential deal-breakers and uncover hidden liabilities. 
  3. Compliance and security – Both sides must take precautionary measures to protect sensitive data and confidential information, including financial and employee data.
  4. Deal analysis – Both sides must carefully analyze the terms of a potential deal to decide whether it’s worth the risk. 
  5. Strategic planning – Both sides must work together to create a realistic plan for their post-deal strategy, including an exit plan. 
  6. Corporate compatibility – Both sides must determine whether their company’s culture and values align to reduce post-deal friction. 

“It is very important for the business owner to sit face-to-face with the private equity group and go through all the major terms of the deal,” advises Divestopedia. “Both business owner and the private equity group need to talk through these questions in a very open manner and get the issues out on the table. There are no dumb questions because most business owners have never been involved in a private equity deal. It’s okay to ask questions and to probe how these things work.”

Specifically, what type of quantitative and qualitative data should buyers and sellers put under a microscope before ruling on a deal?

PE Buy-Side Considerations

Buyers looking to invest in a PE deal have much to consider before purchasing and funneling capital to a company. 

PE investors should answer these questions before committing to a potential deal:

  • Are the company’s financial projections realistic? 
  • Does the company demonstrate a strong brand reputation and ongoing consumer alignment?
  • Is the company forthcoming and transparent with financial data and other business-specific information? 
  • What are the company’s current strengths and weaknesses from a management perspective?
  • How does the company respond to adversity?
  • What are the market conditions and industry trends? 
  • Does the company’s values and ethics match ours? 
  • Does the company have a robust compliance program with regulatory and tax records to match? 
  • How does the company handle data security, and what is the current IT landscape?

PE Sell-Side Considerations

Sellers in a PE deal must perform their own due diligence on a prospective buyer to ensure maximal profit and uncover any red flags.

Companies considering selling to PE investors should address these questions before signing on the dotted line:

  • Does the buyer match our company’s culture and ethical values, or do we foresee an HR nightmare in the making?
  • Is the buyer transparent about their intentions with the company and the direction they wish to take post-sale?
  • Is the buyer making a fair offer?
  • Does the buyer have the corporate infrastructure and strategy needed to assume and improve operations? 
  • What is the buyer doing to demonstrate a proactive commitment to regulatory compliance and data security?
  • Is the buyer a clear and effective communicator, or are we facing frustrating delays and inefficiencies? 
  • Is the buyer willing to invest in the necessary tools and services to facilitate the deal (e.g., legal counsel, software, etc.)? 

How can parties on both sides of a PE deal leverage technology to address the above considerations? Using a virtual data room for private equity transactions is a modern business must. What features should buyers and sellers prioritize when shopping for a VDR solution?

7 Must-Have Features Checklist When Shopping for a VDR for Private Equity

A carefully chosen virtual data room can help buyers and sellers navigate a deal by staying organized, promoting collaboration, maximizing security, facilitating due diligence, promoting more informed deal analysis, fostering efficient communication, reducing frustrations, and the list goes on. What features do buyers and sellers need in a VDR? 

Here are seven key features to look for when choosing a VDR for private equity and why:

  1. An integrated instant messaging tool – Communicate with all relevant parties in a centralized and secure environment. 
  2. A Q&A Assignments feature (AKA Subject Matter Expert) – Simplify the iterative Q&A process by assigning responsibility and keeping the process moving forward. 
  3. An activity tracker – Keep tabs on all document activity, promoting transparency and accountability. 
  4. A digital rights management tool – Retain control over document permissions, revoking access in the event a deal goes awry. 
  5. A next-level approach to security – Benefit from military-grade encryption and boost efficiency with a secure file-sharing solution. 
  6. A customizable file storage structure – Collect and organize sensitive financial and business-critical documents for due diligence and deal analysis. 
  7. A plugin-free solution with built-in API integrations – Reduce the need for risky downloads and annoying software updates while connecting your VDR with your current IT landscape. 

Find all of these features and more with CapLinked’s VDR for private equity deals.

Game-Changing Virtual Data Room for Private Equity

At CapLinked, we offer PE investors and sellers a deal-sweetening VDR solution. Our virtual data room technology ticks all the boxes by delivering collaboration tools and security features to keep your deals moving forward efficiently. 

Unlock the power of VDR technology. Sign up for our 14-day, no-obligation free trial.