Over the past couple of years, an online dealroom has become the must-have accessory for the City's finest. To date, though, there has been very little feedback on their success or client interest. And while some predict that the online dealroom will soon become the workplace norm, for many others the question is, what do they actually do? Can a deal genuinely take place online, or is the whole fuss simply overglorified electronic file storage?
Stephen Murphy, head of European legal sales at Hummingbirds, says he knows of law firms that have lost deals because they could not offer an online dealroom facility. Hummingbirds is a provider of document and knowledge management systems to 40 per cent and 70 per cent of the top 100 UK and US firms respectively, so Murphy may well have a vested interest in promoting the advantages of dealrooms. However, he insists that the company has seen an explosion in the need for online dealroom facilities. He says that clients are driving the use of this technology and demanding the ability for online collaboration in projects.
Virtual dealrooms are effectively a common electronic file. A secure site, or extranet, pertaining to an individual client is established on the firm's website or hosted by a third party provider with the relevant documents deposited there. The site can be compared to a postbox on the web where documents relating to a deal are posted. Assigned third parties can access the specific extranet site using security codes and view or work on documents. Different layers of access can be created for different users, for example giving different clearance privileges for clients and opposing solicitors.
Allen & Overy (A&O) utilises various levels of access in its Newchange dealroom. In the long term, A&O intends to expand it into a marketing tool for clients within their organisations. Known as a client room, it will contain a filing facility and an archive of legal opinions and advice provided by A&O to the client. A spokesman for A&O explains that the dealroom aims to be a form of two-way communication between client and firm, and that it will eventually "become such an essential tool that the first thing the client does in the morning is click onto their client room and gain access to all sorts of information".
Firms with the requisite resources have been developing bespoke software themselves; others are using standard available software. IntraLinks provide services to enable business-to-business (B2B) collaboration over the internet, including secure hosting and 24-hour global support.
Linklaters & Alliance has subscribed to IntraLinks' services for a specific number of online projects. It is also investing in its own software and has created a product that incorporates dealroom functions: Blue Flag for the World Bank, developed specifically for that client, enables drawdown documentation to be generated automatically from an online questionnaire. The system is a "transactional management tool", according to Paul Nelson, head of Linklaters' finance markets group. "I never went for the term 'dealroom'," he says. "You can't sell that to an investment bank." Blue Flag World Bank incorporates dealroom aspects, as it is a repository for all documentation produced during the project. The system includes a process to drive the transaction according to the timetable inputted, explains Mark Boggis, Blue Flag commercial manager. The product is the first of its type, and Linklaters says it is "actively talking to other organisations to replicate it".
Allen Allen & Helmsley became the first Australian firm to offer a virtual dealroom, with access to rival firms and their clients: Allens' Virtual Dealroom (AVD) is hosted and run by IntraLinks and allows both sides to transact business and to post, negotiate and collaborate online.
Norton Rose has bought technology from Hummingbirds to enable it to set up dealrooms via an extranet. Ann Halpern, head of professional resources at Norton Rose, explains that its Deal Smart system is used as a document exchange with clients, advisers and opposition lawyers for ease of the collation of comments.
There are numerous advantages to online dealrooms: delay is reduced; documents posted on an extranet can be viewed online and amended in realtime, at any time; emails with substantial attachments can take time to pass firewalls or even be bounced back from top security systems, but online dealrooms are accessed through the internet and documents can be downloaded more or less instantaneously; the tool is also particularly useful for multijurisdictional transactions and those taking place in different time zones; and lastly, there is usually no limit to the number of users who can access information at any time.
Greater security is afforded through the use of virtual dealrooms, as the sites can be encrypted and user access controlled by passwords. Many firms also situate the extranet on the secure socket layer (SSL) of the internet. Authorised users are generally notified by email of their passcodes (which is a weak link in the technology due to a higher risk of interception).
Other pluses are that the project development and document history are available online; costs and time associated with postage, photocopying and other disbursements are saved; and all documents involved in a deal can be available online immediately on conclusion of the project, which is a tremendously efficient and radical change in the transactional filing processes.
Rowe & Maw has started using its Deal Maw product. However, Ian Thomas, a partner in Rowe & Maw's property department, is not convinced that online dealrooms will have a long lifetime, despite their convenience. On a large corporate project he was recently involved with, a dealroom was offered by a City firm, but not used because no one rang to get the access passwords. Thomas feels that the value of such products may be one-sided and more use to lawyers and their clients than to all the parties to a deal. He attributes this to "dealroom envy", where some law firms are reluctant to use another's online dealroom as it amounts to embracing a competitor's marketing tool.
DLA has a product based on Lotus technology. Daniel Pollick, director of IT at the firm, says: "We see three kinds of use for such online collaborative space." Project vRoom is DLA's online dealroom. Relationship vRooms is used to manage the relationship with the client and contains things such as letters of engagement, billing information and contact references. The overflow is called the Facilitation vRoom and contains "essentially anything else we can think of", says Pollick.
DLA has won beauty parades due to the quality of its vRoom product, and in one close contest for a flotation, Pollick believes that DLA succeeded in landing the work primarily because of its IT facilities.
HammondsDirect is a work management centre which Hammond Suddards Edge created for its B2B conveyancing channel. Lucci Dammone, chief executive of HammondsDirect and partner at the firm, says: "The conveyan
cing market is right for being streamlined using the technological tools available today." The facilities offered go further than dealrooms. Project management information is contained on the client's exclusive site, but instructions can be conveyed online, lawyers work on the screen and all documents are scanned onto the system. Management and financial information is available in realtime from HammondsDirect's databases. The link between the client and Hammonds is achieved by the web on a secure site for each client, or by system integration, which Dammone says is even more secure.
Despite the efficiencies and added value of online dealroom processes, Pollick remarks that they may be "a solution looking for a problem". He says: "To get value from an online dealroom, everybody must be prepared to change their working practices. It's easy to say, 'I'll email you the document', and do it, but use of online dealrooms requires commitment and a level of discipline." n