Craig Clay, president of global capital markets at Donnelley Financial Solutions (DFIN), a Chicago-based financial compliance company, speaks with Acuris Capital Intelligence about virtual data rooms—one of their core products—post-COVID-19 as well as its partnership strategy.
Interview by Rachel Stone
Q. What has changed in the M&A process during the pandemic?
The piece that accelerated change in the pandemic was the comfort level of people not being together in M&A transactions, meeting a management team virtually though virtual data rooms (VDRs).
Our VDR has artificial intelligence built into it—companies are reducing the time and cost of M&A while they're doing diligence. We have pre-trained provisions that are written into the room. For example, you can automatically analyze indemnification, change in control, assignment, insurance, anything that has to go to arbitration, etc. We are making deal teams more efficient.
Q. Do you expect the increase in VDRs to persist as regions reopen and travel recovers?
Yes, it'll never go back. As we fast forward to whatever the future looks like, we will go back to some version of where we were in 2019, but there are a lot of conveniences that people are going to hang on to. People are not going to travel just to sit next to somebody and to look at a document.
In the pandemic, we accelerated what could have been years of technology adoption and evolution into months. It's too good to go back. Will people get together? Of course. There is that human part of M&A that will certainly come back, but the diligence part of it has been permanently changed.
Q. There’s a battle among VDR providers to dominate the full lifecycle of a deal. How is DFIN closing the gaps?
We're looking at pieces like [accounting workflow automation software company] FloQast, where we don't have the solution, but we think we can partner with the leader. [DFIN announced a partnership with the company early this March.] We're not going to build in that space, so the best thing for us is to have a great partner network to deliver those capabilities.
There are other areas where it doesn't make sense for us to acquire—things are pretty expensive. You can look across a number of spectrums such as FDA approvals, which could be coupled with our disclosure and VDR tools.
We’re delivering on the promises that we have in software growth and adding advantages through partnership. Sometimes those lead to other things, but that's the strategy today.