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How M&A Dealmaking Will Shape the Insurtech Revolution
How M&A Dealmaking Will Shape the Insurtech Revolution
A wave of disruptive start-ups is bringing transformative tech-focused insurance products to market. Traditional industry giants are taking note. Amid capital and regulatory challenges as well as uncertainty caused by the pandemic, will we see a spike in strategic M&A in the coming year?
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Let AI assist you with your next Legal Due Diligence
Intro
it’s absolutely critical for buyside teams to move with speed and confidence on decisions about which deals to pursue. Traditionally, buyers have had to navigate due diligence manually, using inefficient processes. These lead to lost time, incomplete analysis or missed red flags. This not only affects the buyside. Delays in a deal due to human oversight and inefficient processes slow down the deal considerably for the sell-side as well. These delays can have a domino effect, as slower due diligence can potentially impact the valuation of the deal.
Some of the challenges with the traditional approach to doing a Due Diligence are:
The seller’s information in the VDR rarely aligns with the buyer’s due diligence check-list, or request list.
Key information is often miscategorized or missing entirely.
Traditionally, buyers have had to navigate due diligence using inefficient processes like manually cross-referencing files in the data room against their check-list, and relying on email and phone calls to assign check-list items and check progress, which can lead to wasted time, incomplete analysis or even lost deals.
Our Approach using: Specialists + Technology
Our resident technologists, transaction specialists, project managers and AI (Artificial Intelligence) technology tools (DealVision by Intralinks) work alongside your buy-side team in conducting the due diligence. The AI tool (DealVision by Intralinks) managed along by our team of specialists do the heavy lifting, whilst your team focus on developing and implementing the best strategy and structure following our expertly conducted sourcing and analysis of required files from the due diligence room.
The Specialists
Our Due Diligence specialist team consist of:
Our technologists: They set-up our Artificial Intelligence platform using our check-list or a high-breed of your check-list and ours.
Our transaction specialists: They do the heavy lifting of using the AI platform to sift through the files and folders in the data room and generating the red flags and areas of synergy. Note that AI is only as good as the resources utilising it.
Our Project Managers: They use same platform to coordinate Q&A. Time-lines and deliverables from across the subject matter experts and other participants in the due diligence. The result is a well synchronised legal due diligence.
The Technology
Automated content mapping – Artificial Intelligence (AI)-enabled automated content classification maps the contents in the seller’s VDR to your due diligence check-list – saving the time typically allocated to manual classification and review of this information set.
AI-driven gap analysis – Highlights missing information.
Activity dashboard – The due diligence process manager now has real-time visibility into the team’s evaluation progress.
Consolidated findings and Q&A – Rather than rely on ad hoc methods of collecting feedback and key findings and questions from the deal team, managers now have these updates at their fingertips in a secure, centralized hub
Conclusion
Knowing that there is an offering in the market specifically designed to streamline the due diligence phase, how comfortable do you feel about continuing to rely on manual buy-side processes that are prone to human error?
MLS (Managed Legal Services) - The preferred choice for Legal Due Diligence
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Before
Currently, buy-side teams spend a significant amount of time trying to understand whether the information the seller has posted in the VDR matches their key requirements. In most cases, a check-list is created, and each member of the due diligence deal team is manually assigned their own item on the check-list. They are tasked with thoroughly examining the details in their assigned area and reporting on whether the information is complete, categorized properly and satisfies their company’s needs.
The next step sees each member of the team cataloguing their findings, usually in Excel, and emailing the project manager about their progress. The manager must trust that the team member has performed their full due diligence and not missed anything in their assigned area. The manager must then gather the same information from each member of the team in the same ad hoc manner, relying on Excel and emails. Several check-ins on progress may be necessary. This process results in a lot of back and forth, overwhelming your in-box and causing version-control issues in Excel.
Upon receiving the findings from each team member, the individual leading the deal must then analyse the results manually and identify areas of vulnerability.
All the while, the sell-side is anxiously awaiting word from the team to see if the deal can progress.
After
With MLS, our specialist team and AI platform quickly organize deal documents, manage the deal team’s due diligence evaluation efforts, and identify key findings early in the process. The offering introduces several key innovations to help buyers:
l Save time typically allocated to manually classifying and reviewing information with our artificial intelligence-enabled automated content mapping solution. This feature maps the contents in the seller’s VDR to the buyer’s due diligence check-list.
l Gain real-time visibility into the progress of the evaluation team. Managers no longer have to chase down their team members for progress reports.
l Consolidate the deal team’s findings rather than rely on ad hoc and unsecure methods of collecting feedback. Managers now have these updates at their fingertips in a secure, centralized hub.
Our offering has been specifically built for participants on the buy-side of a transaction - designed to match actual work-flow needs and provide transparency into the dealteam’s activity in real time. We are committed to supporting dealmakers everywhere – and on each side of the deal – with the most technologically advanced tools and the best resources to empower valuable, data-driven results.
SPONSORING FINANCIAL LITERACY FOR PRIMARY AND SECONDARY SCHOOL CHILDREN VIA EXPERIENTIAL LEARNING
MLS | Intralinks are the proud partners of the All Rugby Schools (ARS) soon to be announced Elite Development Programme (EDP for short). Several years in the making, the Elite Development Programme utilises experiential type learning to teach children at Primary and Secondary School about generating, managing and growing income.
We have sponsored the ARS programme for more than six (6) years and quite proud of their achievements to-date.
Click poster below for more information.
Financial Literacy for Primary and Secondary School Children via Experiential Learning
MLS | Intralinks are the proud partners of the All Rugby Schools (ARS) soon to be announced Elite Development Programme (EDP for short). Several years in the making, the Elite Development Programme utilises experiential type learning to teach children at Primary and Secondary School about generating, managing and growing income.
We have sponsored the ARS programme for more than six (6) years and quite proud of their achievements to-date.
Click HERE for more.
Hurdles of Parties on the buy-side of a Property Sale Transaction
The hurdles confronted by parties on the buy-side of a property transaction are rather high when conducting a due diligence on the property in question. It's akin to entering an uncharted territory for which there is no map or compass.
When conducting a due diligence on the property the intention is to identify:
All parties involved in the property from its inception and who the buyer should be contracting with,
What role the parties played in the property and should any of them still play a role in the proposed transaction with the intended buyer,
The tenure involved in the property and what’s available for the intended buyer to enjoy,
The actual size available for disposal to the buyer,
Interest(s) in the property other than that of the intended seller,
Inevitably the aforementioned list is by no way exhaustive, but nonetheless essential, if the buyer is to source all the information needed to make an informed purchase.
On the face of it, sourcing all the relevant documents (deeds, contracts, registrations etc…) from the seller ought to be quite straightforward. However, poor document preparation and management has resulted in this process being the most time consuming and tasking. Issued arising include:
Documents are not stored in a central location,
Documents in hardcopy as opposed to digital requires close physical proximity to the document,
Mixed drafts and originals in a single file consumes time as buyers have to sort through what is relevant from is not,
Documents are with multiple parties as opposed to one,
Sellers' reluctance to disclose all relevant information and instead drip feed the supply of documents.
The list of issues goes on and on. The result of this inefficient manner of storing and managing sell-side documents is a buy-side due diligence that consumes an unnecessarily long period of time, with lots of repetitive tasks and incorrect data for the buyer to consume.
The way forward is quite simple using today's cloud technology. Sellers can securely and cost effectively assemble and store all relevant documents relating to the property in the cloud and give access per demand to buyers to conduct their due diligence. This means digitising all relevant documents relating to the property in question and thereafter uploading it to a secure cloud location which can be accessed using the internet. Buy-side access can be monitored using sign-in and permissioning. This requires all buyers to have their own username and password, and the view of files can be restricted to on-screen view only, or on-screen view and print, or on-screen view, print and download. Using information rights management, documents downloaded can always be deactivated when buyer access is no longer permitted. All this the seller can do at a reasonable cost.
The aforementioned means all relevant property designated documents can be found in a singular location with a singular custodian. In addition, the seller is also assured of being able to determine who to admit to view the documents and can track when the documents are viewed, opened, printed or downloaded. This reduces the back and forth between seller and buyer and the seller is able to quickly weed out the buyers that are simply fishing from the serious buyers that have serious intent.
On the buy-side a due diligence tool such as an AI tool can fast track the process and make it even more efficient especially if a Q&A (Question and Answer) tool is included in the mix. I have found Artificial Intelligence tools that can probe the cloud in which the title documents are stored to do the heavy lifting of identifying what is relevant to the buyer from what is not.
Financing acquisition of assets using Digital Ledger Technology (DLT)
Background
Financing acquisition of assets needed to increase production or produce new products can be challenging in an era in which the traditional investor forum are holding onto what they have with a wait and see approach to opportunities, and internal funding is stretched. Unfortunately departments that need to acquire these assets cannot afford a wait and see approach.
Our Approach
Corporates need to rethink their traditional approach to funding asset acquisition and in the process review their traditional sources and means of funding asset acquisition. We at MLS believe that corporates need to begin to consider funding from investors that are Distributed Ledger Technology (DLT) savvy. These investors are experienced at viewing assets not as part of operations but as distinct assets capable of being monetised as standalone assets once digitised or as sometimes also referred “tokenised”.
These new breed of investors that have taken a shine to investing in what are referred to as NFTs (non-fungible tokens) have been born and reared in the era of crowdfunding sites such as indiegogo or kickstarter where persons or corporates seeking to fund their projects showcase the opportunity on a private or public url for investors to peruse and purchase a stake in the opportunity even before it materialises and with no intermediaries. Because they were groomed in this era they comfortable looking outside the traditional fund space. NFTs have taken funding of the acquisition of digitised assets to a different level for corporates seeking to raise funds for the acquisition of assets to be used within their operations.
With NFT’s, corporates can seek funding for assets they seek to acquire as distinct standalone assets from the rest of their operational assets though they will be interoperable. This is especially possible wherein these assets can be monetised and are technology based with the ability to be monitored using the internet of things (iOT). Such iOT based infrastructure lend themselves appropriately for being monitored and monitised.
The Process
These assets are digitised, not interchangeable and given a distinct identity which is in-corruptible, using smart contracts thus making them a Non fungible token (NFT). Using smart contracts again, fungible tokens are generated which will serve as the means of acquiring interest in the NFT based asset. The fungible tokens are exchangeable,uniform and divisible.
Case Study
Here is an interesting use case scenario involving an energy company deploying downstream infrastructure to serve a new market. The new infrastructure will integrate with the old upstream platform. Funding for the new infrastructure can be monitored using iOT. Having digitised the intended assets to be acquired as NFTs, fungible tokens are offered to investors interested in the business case behind the intended asset acquisition. Inevitable a due diligence room is available for the investors to conduct their study of the business case. Investors exchange fiat currency (such as Naira, US Dollars or Pounds Sterling) at the given exchange rate on the distributed ledger exchange. The investors are free to trade their fungible tokens in the asset on the same distributed ledger exchange.
Development of a White Paper for an ICO
MLS by Oladipo Opanubi has just concluded developing a whitepaper for an ICO. You might question what a white paper is and also an ICO. Lets kick off with the ICO. As explained in yesterdays article an ICO is an Initial Coin Offering very similar to an IPO. For more on that please see yesterdays article. A white paper is a precursor to an ICO and is used in the same way a prospectus is used in a traditional IPO. According to https://cointelegraph.com/ a white paper is: ” … a document which includes an outline of a problem that the project is looking to solve, the solution to that problem as well as a detailed description of their product, its architecture and its interaction with users.” Potential subscribers to the ICO are greeted with a white paper and the success of an ICO is largely determined by the drafting of the white paper.
You can pretty much guess what needs to occur ahead of the white paper being drafted. A comprehensive due diligence of course. The success of pin pointing what a subscriber requires to see to make an informed decision on if to subscribe to the ICO depends upon if the data in the white paper is verifiable? Hence its important that the due diligence be a deep dive due diligence. At MLS we would do our own AI based due diligence ahead of developing the white paper and thereafter use same process to create an exchange in a sell-side structured VDR (virtual data room) for the subscriber to do their own due diligence. So we have two due diligence exercises, the first for developing the white paper and the second for the subscriber to the ICO. Everything in the exchange of the whitepaper must align with what is in the VDR otherwise it begins to raise doubts about the opportunity in question.
Another part of the due diligence process that is critical is KYC on subscribers.
… the pseudo-anonymous nature of token offerings (ie ICOs) makes it technically impossible to determine a subscribers real identity. The only transparent feature known about the investors is their wallet address, i.e., the combination of numbers and letters that subscribers use to send and receive tokens. Although token transfers can be reconstructed using the information stored on blockchains, they never reveal the true identity. Hence, the term “pseudo-anonymous.” - https://cointelegraph.com/
Verification of investor identities via KYC (know your customer) or whitelist registrations builds confidence in the eco-system of coin offerings. Potential investors provide personal data (e.g., photo IDs and email addresses), undergo approval processes, and explain their intention to buy the token in question in a short.
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MLS (Managed Legal Services) by Oladipo Opanubi specialises in Due Diligence for M&A and Financing transactions. We utilise technology such as VDRs, AI, and Deep Dive analytics to get the job done. Though we emerged from a Law Firm most of our resources are technologists supported by subject matter experts.
Tokenization as a pathway to Corporate Finance
The current economic landscape has placed several impediments in the way of funding operations and acquisitions. Understandably traditional investors are cautiously awaiting the storm to blow over before proceeding with pending opportunities. Financial intermediaries are responding to the conservativeness of their traditional source of funds and holding back with proceeding with transactions.
Despite this lack lustre approach to transactions, money is still seeking channels through which it can funnel itself to opportunities and these opportunities are still there. Corporates still have a need to acquire more infrastructure and in some cases acquire other corporates.
There are a set of advisors that these seem to have little time or resources to take on new transactions. Once approached their response is we are booked up for the next couple of months. These are ICO advisors. These advisors appear to be where some monies have found a channel through which to meet opportunities. What is an ICO (initial coin offering)? An ICO is a listing of digital assets on a crypto exchange. Very much similar to the traditional IPO but decentralised, without any intermediaries, and relies upon social media type of infrastructure as a means to market the digitised securities.
Pretty much anything can be digitised or as I prefer to refer to it, tokenized. Once tokenized the former brick and mortar asset can now be listed on a crypto exchange. We come in at the phase of conducting the due diligence on the brick and mortar asset or opportunity which is necessary to identify its value ahead of tokenization and subsequent listing at a particular price per token on the exchange.
Corporates can explore this blossoming approach to crowd funding acquisition of assets or corporates seeing as both of the aforementioned can be digitised using tokenization. This particular approach lends itself well to assets or opportunities which can be monitored using iOT (internet of things). The following lend themselves to iOT infrastructure: a QSR (Quick Service Restaurant); an upstream LNG player providing domestic supply; a logistic company; an agriculture based production company and a property development firm. These are just five of thousands of operations that now lend themselves to iOT and hence to wooing funding via digitisation of their assets.
Regulators' core concern with this approach to corporate finance is the need for such transaction owners to do their KYC on investors and for such tokenized securities more importantly to be registered for monitoring purposes.
Please contact us if you would like some help exploring due diligence and drafting whitepapers for tokenization and ICO listing.
MLS (Managed Legal Services) by Oladipo Opanubi specialises in Due Diligence for M&A and Financing transactions. We utilise technology such as VDRs, AI, and Deep Dive analytics to get the job done. Though we emerged from a Law Firm most of our resources are technologists supported by subject matter experts.
Introducing DealVision™ for AI based Due Diligence
The new Intralinks DealVision solution leverages artificial intelligence to let you quickly:
Organize seller’s documents according to your checklist
Assemble your team and assign tasks accurately
Manage your team’s progress through a real-time dashboard
MLS by Oladipo Opanubi supports Dealvision with its trained support personnel that will assist you through the entire due diligence process. We assign our technologists and project management teams to work alongside our solicitors to fast track the entire process.
Bankruptcy and Restructuring (by Intralinks)
Managing critical information and communication
Time is of the essence in today’s restructuring market. Liquidity constraints, risk-averse lenders, falling profitability and general market uncertainty are all beleaguering businesses across the globe. As a result, the timeframe for stabilizing operations, collating an information base, bringing in advisors and mapping out a rigorous restructuring framework has never been so compressed for companies entering a restructuring process. Your bankruptcy or restructuring deal is complex and involves coordinating large numbers of documents and communication among many parties. Intralinks Virtual Data Rooms streamline multi-party collaboration and content exchange so you can restructure viable businesses, secure financing or liquidate assets faster.
Tech Tools for Dealmaking
Augmented Reality, Blockchain, AI for projections and analytics, Cloud Hosting, Quantum Computing, Auto Content Creation etc…. These were once idealic tools that could be used in deal making, but now they have, in some cases, become indispensable tools in the war chest of deal making. However few corporates and professionals are aware that such tools are available and how they can favourably impact their operations at minimal cost.
Just before we go into discussing these tools, it is important to note that these tools do not always carry a hefty price tags. There are two (2) reasons for this:
1. Cloud Hosting (shared access to hardware accessible on demand over the internet) birthed “as a service offerings” and “as a service offerings” have enabled commoditisation of tech offerings. Commoditisation has in-turn simplified access to to tech offerings thus lowering the bar to entry. Commoditisation has also drastically converted tailored offerings to off-the-shelf offerings meaning gourmet / haute de couture has become fast food / off the rack.
2. Companies such as MLS and Axiom (as it once was before the split up), have pooled a miriad of resources geared towards offering tech for deal making and making same available on an “on demand” basis. It means the aforementioned technology does not have to be hosted in the premises of the user and the user need not employ resources needed to use same technology. The MLS and Axiom like companies of this world have technologists, solicitors, analysts, project managers all under one roof operating same technology on an on-demand based commercial model.
With the commoiditisation of technology and restructuring of its offering for deal making by companies as mentioned previously, useage of tech tools in the world of deal making is not as challenging as it once was perceived.
Over the coming days I shall be reviewing each tech tool individually with regards its use in deal making. Next write-up shall be on “Augmented Reality for deal making”.
All comments and contributions on your experience in using tech tools for deal making will be highly appreciated.
SS&C Intralinks® Market Brief: Analyzing the Oil & Gas Environment
The Oil & Gas industry has been battered by a price war and besieged by a pandemic. What’s next?
Aftershocks of the recent oil-price war and production cuts fueled by the COVID-19 pandemic have created an unprecedented environment for M&A in the oil & gas industry.
Our new market brief, produced in conjunction with PitchBook:
Maps out the historical context for this combustible combination of market pressures and events
Takes an unflinching look at current conditions through the M&A lens; and
Provides insights on deal-making opportunities and challenges that lie in the uncharted territory ahead
Click HERE to download the BRIEF
Tuesday Talks with Leela
Intralinks is delighted our 2nd Tuesday Talks with International Keynote Speaker & Facilitator, Leela Bassi. On May 5 at 08:30am BST find out how to Flourish through Mindfulness to help keep your grounded daily. Contact me for more information!
To keep you going during these difficult times Intralinks is pleased to announce our three-part series of ‘Tuesday Talks with Leela’. Join us for our second session on May 5 at 08:00 am BST where we’ll be looking at tools to take back control, maintain good mental health and stay calm during these unprecedented times. Contact me to register.
Join us on May 5, 2020 for the second of our three-part series of Tuesday Talks with Leela. This 30 minutes webinar will teach us how mindfulness can equip us with tools to take back control, maintain good mental health and stay calm & resourceful.
Click HERE to register
The Labours of Heracles
[An article on technology used in dispensing the COVID-19 Intervention Fund]
The ten (10) labours of Heracles which eventually became twelve (12) is well documented in Greek mythology. Heracles is better known as Hercules and his labours were challenges which involved, amongst many others, fighting monsters and beasts of different types. COVID 19 has created a range of challenges that seem to have no end. We like Heracles get use to a particular challenge and before we know it we are enveloped with a new set of challenges. Each challenge, like Heracles’ challenges, is endowed with not one but multiple monstrous heads.
Credit to individuals and corporates facing difficult times is a brilliant initiative and necessary step by governments of different countries. However issuing such credit creates monstrous challenges. Issuing credit required issuers to deal with the below-mentioned challenges:
procuring data from applicants in the way of supporting documents to credit applications;
secure storage of supporting documents submitted by applicants;
due diligence on same supporting documents.
These are just a few but necessary steps on the road to supporting these individuals and corporates. Lets take this challenge slightly further. Multiply the aforementioned by hundred of thousands of applicants, and to add further complexity create near impossible timelines to process same applications. Time is of essence seeing as the businesses have vendors and resources that keep the business afloat and need funding.
Most countries around the world are experiencing this multi-headed beast, and their weapon of choice in beheading this beast is technology and resources skilled in wielding this deadly weapon. First weapon of choice is a bank grade secure level cloud based platform with an easy to use user interface which applicants use to submit their supporting documents. It is essential that the applicants are guided in their submission by same platform. The object of the system is not to guaranty failure and difficulty but rather ensure all documents needed for effective analysis of applications are available. The Intralinks Document Repository is being used for this very purpose because of its easy to navigate user interface and tried and tested security system.
The second weapon of choice is machine learning artificial intelligence to aid auto review of supporting documents. Missing or expired or incorrect data in supporting documents are red lighted for reviewers to immediately set-aside whilst completed submissions are green lighted for reviewers to pass to the next level in the process. Intralinks DealVision artificial intelligence was specifically built with this in mind and makes the job of reviewers much easier and faster.
The final weapon of choice is a auto process flow system that manages the approval process. It also aids post transaction auditing. The Intralinks WorkFlow Tool is purpose built for managing the approval process as documents are moved from one phase in the process to another.
Heracles did not have these weapons when battling Hera’s many beasts but you do, so maybe you can dawdle through your Labours in record time.
Story of Resilience and Fortitude
We are in the FMCG (fast moving consumer group) space . Business has been in the family for decades. Handed down from generation to generation. With plummeting sales, revenue is drying up and I do not see the light at the end of the tunnel. Now trade debts are mounting. Where do I turn to? Whats the next step?
I am more concerned for the hundreds of loyal staff that have dedicated their lives to this business and the many lives that their earnings go towards supporting. I have called the lawyers and financial advisors. They say there is a way out but time is of essence and we need to handle multiple tasks simultaneously. We need a helping hand.
Hundreds of clauses to review amongst hundreds of agreements. Your trying to save the company. On the face of the current terms of the agreements there is no way the company can cover all its growing liabilities. Maybe there is a way out of this. Just maybe if I am fast enough I can review and revise negotiate and revise those critical terms with hundreds of vendors/creditors. Just maybe. It all comes down to how quick I can be.
Considering speed of contract review is the immediate need, we will focus on that. Contract review platform with a subject matter expert (SME), Contract Reviewer and Technologist will do the trick. What would ordinarily take several weeks can now be done within a couple of days or less. The platform, once setup by the team, will be able to identify critical clauses for review and manage simultaneously the redraft and dissemination to the vendor/creditors. My lawyers can now handle the negotiation via the data room securely and separately with each creditor and I can track the the progress being made real-time via the dashboard.
Some matters have gone beyond redemption and there are pending litigation. However I need to analyse each matter and smartly apportion the time and resources. Enter an AI (artificial intelligence) based due diligence platform with a document reviewer expert that sets up the platform to scour through the pages loaded into the data room to identify which matters are high priority. It also scours for relevant cases that are relevant in producing a report for me and my lawyers. I and my lawyers are saved a great deal of time and human resources that are better apportioned elsewhere.
Which assets are unsecured and beyond the arm of creditors and which are available to be sold to help support continued operations or complete diversification. We need to be smart about this. Walk in “data analysis platform” with a technologist loading up the asset list and documents referring to assets that are charged/secured against debt. Its a complete asset due diligence with a difference because at least I know what I can and cannot touch. The lawyers find this report gives them peace of mind.I think I can make it. No! I take it back. I know I can make it.
CARES Loan On-boarding Solution - for Nigerian Banks
Background
Federal Govt of Nigeria announced the below amongst others to assist the struggling economy
N50 billion targeted credit scheme for households and small- and medium-sized enterprises that have been particularly hard hit, including but not limited to hoteliers, airline service providers, healthcare merchants, etc.;
N100 billion credit support for the healthcare industry particularly pharmaceutical companies, hospitals and health practitioners, that want to start new or expand existing drug manufacturing or healthcare facilities;
N1 trillion in loans to boost local manufacturing and production across critical sectors
Challenge
This is all wonderful news but now comes the heavy lifting.
Dispensing of such loans is back breaking work
Involves doing due diligence on the loan applicants
Requires sifting through tonnes of applications
Requires sorting and collating same applications
Also requires measuring internal checklists with what documents applicants have submitted
These are just some of the tasks awaiting commercial and merchant banks that shall experience the brunt of this heavy lifting
Solution
I suggest utilising a mix of the below technology based solutions. Remember, we want to avoid a large number of persons trouping into banks.
Easy user interface for application submission
Cloud based sharing and collaboration platform for centralised access to all loan applications
Cloud storage must be a bank secure grade platform
Workflows to manage the approval process
Artificial Intelligence to handle the analysis of the loan applications
Getting ahead of the curve with Technology Due Diligence
The below write-up was inspired by the words of the Governor Cuomo, Governor of New York. In nearly all of his television presentations he always expressed the need to get unto the front foot as they have been on the back foot since the outbreak commenced. His words:
“We talked yesterday about planning forward, getting ahead of it, that we have been behind on this virus from day one and rather than be reactive, be proactive, get ahead of it.”
In the world of rugby football we call it being on the front foot. Whenever you find yourself on the backfoot it means you are not prepared and slow to react. When on the front foot it means you are anticipating the tackle or receiving the ball and thus quick to react and move ahead of the opposition.
Technology Due Diligence is increasingly becoming relevant with most financial transactions, as most industries have hardware and software incorporated into there operations in one way or another. Unfortunately its an area in general legal due diligence that is given little attention.
With the advent of Covid 19, most industries have incorporated even more technology into their operations. Remote monitoring of activities requires sensors and IP cameras. Remote working requires use of cloud solutions. Even payment solutions require incorporating new concepts like blockchain. In one way or another our beloved corporations will never be the same again once we come out of the Covid 19 era. Part of the change shall be our increased reliance upon technology.
Considering technology shall play an even more pivotal role in day to day operations, the value and risk attached to it shall be even more critical. Due Diligence methodologies will need to change. On the sell side, the type of documents need to be prepared must show amongst others:
1. Software ownership status
2. Software and hardware architecture scalability
3. Third party platform interface
4. User dependence and expansion potential
5. Status of software updates (some software have reached their end date and no updates are available which is a major risk)
6. Third party support for proprietary software
7. Certification of in-house support staff to show competence and capability to manage IT infrastructure
8. Software code language for in-house/outsource developed software
These are just a few of the things that corporates on the sell side need to consider in a typical due diligence exercise when populating the data room. The more comprehensive the quicker the potential for the transaction to be consummated.
On the buy-side the risk can be high when acquiring IT assets. Poor due diligence could lead to the wrong valuation and exposure to risks which pop-up post acquisition. The cost of correcting such errors could be scary. The check-list for Technology Due Diligence needs to ensure it covers both hardware and software assets. Bare in mind that the hardware components usually always include a software component.
Lenders to a corporates need to ensure Technology Due Diligence is also incorporated in their due diligence process. Imagine a food based manufacturing company seeking a loan to assist with their expansion plan. Undoubtedly the ability to pay back on such loans is dependent upon the operations working unhindered. All that’s needed to put a spanner in the works is for the software managing a critical part of the manufacturing line to cease being supported and the firm that developed same software to cease to exist. Note that manufacturers and suppliers of hardware rarely are the same parties that developed the software which manages the operation of the hardware.
Insurance firms need to include IT assets as part of their due diligence exercise when valuing the assets they seek to attach a premium to. Failure to attach the correct value to an asset could lead to significant issues down the road for both parties.
Procurement departments need to deploy a due diligence mindset to ensure all risk elements are captured and positioned carefully when corresponding with vendors during the tender process.
The post Covid-19 era must not be taken for granted as we deploy an increasing amount of technology. Lets stay on the front foot. Not the back foot.
For assistance talk to one of our due diligence experts. It could be the difference between a successful post covid 19 era and …..
Managed Legal Services is a unit of the law firm Oladipo Opanubi. It focuses exclusively on due diligence for buy-side, sell-side, restructuring and debt transactions. The team consists of subject matter experts (SME), Technologists, Project Managers and Solicitors.
+234 803-301-9519
Role of Data-rooms, Blockchain and AI in M&A transactions
https://www.linkedin.com/pulse/when-combined-world-blockchain-ai-data-rooms-throw-up-oluseyi-opanubi
With the advent and mix of AI, smart contracts and datarooms, Managers of data rooms are no longer glorified secretaries running around collating documents to answer a preset set of questions either drafted by the buy-side or sell-side solicitors. There is a certain deja vu in the world of AI when one looks at what the dataroom manager is doing. If there is anything AI is good at its studying questions and asking questions of a set database or in this instance a corporate archive.
I imagine Intralinks in the not too distance future being an encrypted software patch which acts as a bridge between company archives and the Intralinks AI/Exchanges. The patch acting as somewhat of a bridge between the company archives and Intralinks AI/Exchanges whose sole objective it is to query the company archives through the patch installed in the company archives. In so doing the the questions posed are answered directly from the corporate archive. Mirror images of the documents that answer the questions posed are formed in the exchange setup by Intralinks AI. A folder structure based on the type of industry sector that the target company operates in is gradually filled in Intralinks Exchange.
What is the job of the manager you may ask? Well no more than a quality assurance officer am afraid. However, quality assurance is critical and thus needs some tools to ensure its done just right. Going into the exchange need not be the standard login into a two dimensional screen. Instead, it is a choice of your virtual reality bot or avatar, your holographic tour guide or an alexa type voice assistant for quality assurance on the go.
I am amazed at what is feasible with AI and attendant technology but what is even more interesting is how it will make M&A so much more low cost and enable MLS to do what it does best, serve the SMEs.
In serving the SMEs, backbone of any thriving economy, we need to add what I refer to as fairy dust, SMART CONTRACTS. The smart contracts lead us to a world formed from blockchain in which we truely enable transactions to occur at a fast rate but clinically without us emotional beings getting in the way.
Seyi Opanubi, MLS by Oladipo Opanubi and Intralinks, 0803-301-9519
BUY-SIDE OPPORTUNITIES - 28 JUNE 2019
UAE based Corporate looking to acquire entities providing water utilities services. (USD 1M+ Revenue)
Sub-Saharan PE Firm looking for sector agnostic investments with the exception of Real Estate, Mining and the Sin Industry. (USD 5M+ EBITDA)