The hard work is beginning to be recognised, revenue is growing, and a business in the digital assets and blockchain space is about to be involved in a material corporate transaction, whether an investment round or a purchase or sale of the company (a “Transaction”). In this article, Simon Grimshaw, Counsel in our Mergers and Acquisition and Private Equity Practices suggests “the three R’s” for digital assets and blockchain business preparing for that all important Transaction.
Readiness
Any transaction is going to include an element of due diligence and, in today’s market, a good amount of it. This involves investors’ advisors (such as lawyers, tax advisors and accountants) asking questions and reviewing various information relating to your business. Typically this information is uploaded to an online file sharing platform, usually referred to as a data site. This review exercise is time and resource intensive (see 2 below!) but there is a lot you can do in advance to smooth this process:
- Work with your own advisors to prepare for this as much as possible in advance. Your own financial advisors and lawyers in particular, can give you a typical list of due diligence questions which you can use as a framework for building your datasite.
- Consider from the point of view of the reviewer – although file names and a filing system may make perfect sense to you, will they to me? Try to organise your information so that a third party could work out the contents of a document without having to open it. Use a formal online data room rather than just file sharing. In the context of a funding round, they are not expensive and the short-term inconvenience will be outweighed by the subsequent benefits.
- Be open in your disclosures. Your investors will be working with you for a number of years, so be clear with them both in your conversations and disclosures about the risk areas for your business. Anticipate the awkward questions.
Resource
Regulation