M&A is one of the best ways to expand, increase market share, boost capital, and access the best talent. However, the process is very complicated, complex, lengthy, and requires lots of resources.
A virtual data room is a solution designed to make M&A transactions easier and faster to complete. How? What are its advantages? And what to consider when choosing among numerous virtual data room providers? Find the top tips in the article below.
A virtual data room is a cloud solution used for the secure storing and sharing of confidential information. It also allows users to work collaboratively in a controlled environment.
Data room software is used for different purposes and among the most common are M&A in healthcare, finance, technology, real estate, media, and telecommunication.
Here are the features that the best virtual data room providers usually offer to their customers.
|Groups of features||Features|
|Access security||Two-factor authentication to verify users’ identity|
Detailed users’ permissions to give access based on a role in a project
IP access restriction to limit access from a certain IP address
|Document security||Dynamic watermarks to see who and when viewed a file|
Redaction to black out confidential data in the text
Fence view to preventing unauthorized file viewing and screen printing
|Document management||Bulk uploads to upload many files and folders simultaneously|
Drag-n-drop to quickly grab and drag a file to a data room
Automatic index numbering to order files and folders in sequential or numerical-alphabetical order
|Activity tracking||User-activity tracking to see who viewed, printed, edited, or downloaded a document|
Full audit trails to record every action that occurs in a data room
Reports to receive an analysis of a data room activity
|Communication||Live discussions to discuss project-related questions in threads, posts, and comments|
FAQ section to create a list of questions and answers about the documents
Expert assignment to automatically or manually assign a specialist that can answer project-related questions
Here’s how a company can benefit from online data room software when conducting M&A.
1. Centralized document storage
Due diligence is one of the most important stages of M&A. This is when a buyer or an investor reviews the target company’s assets, liabilities, structure, operations, financial, and legal matters. So the checklist of documents is huge.
An electronic data room helps to ease the process of due diligence because it lets:
- Store all due diligence documents in one secure place
- Update files in real-time
- Access required documents anytime and anywhere
2. Safe document sharing
A target company is usually vulnerable in terms of security during M&A as it has to expose confidential information to external parties. Sharing such data via traditional means like emails is inconvenient and highly insecure.
Virtual data rooms help to solve this problem. Access and document security features allow a seller to:
- Ask all new users to sign NDA before accessing the company’s documents
- Revoke a file or folder access anytime
- Adjust a document viewing mode (fence view or redaction)
3. 24/7 Accessibility
One of the best things about a virtual data room is that key stakeholders can access it from anywhere and work at their own pace. There’s no need to travel to physical data rooms or organize private meetings. It saves a lot of time and money.
Here’s what makes a data room so convenient and accessible:
- Mobile apps. Access a VDR from a phone and enjoy a streamlined interface optimized for mobile devices.
- Single sign-on (SSO). Access a data room with a single login and password for all projects.
- Professional support. Contact a 24/7 support team in case of questions or requests.
4. Effective collaboration
A data room is a place where M&A participants can not only store and share documents but also communicate any question related to a particular file or a project. This is very convenient, and secure saves time and facilitates decision-making.
Virtual data room users can:
- Start group discussions
- Leave comments
- Receive notifications about uploaded files or other activities
- Arrange meetings via audio or video conferencing tools
Virtual data room services are much cheaper in comparison with their alternatives like physical data rooms. They’re also much safer than less expensive or free options like cloud storage or email. Together, it makes them extremely cost-effective.
VDRs help to reduce costs on:
- Traveling and associated expenses when going to physical rooms
- Renting and maintaining physical data rooms
- Printing and storing paper documents
Here are five main steps to undertake when choosing a data room for an M&A transaction:
- Define your needs. Think how much storage volume your M&A transaction requires, how many people will access a VDR, and what features users need.
- Define your budget. Think how much you can afford to spend on a VDR solution, as providers charge differently depending on what features and how many gigabytes a project needs.
- Assess providers by certain criteria. Evaluate a provider’s reputation, years of experience, how many customers it has, and what market they are from.
- Compare virtual data rooms. Read data room comparison reviews to see which solution will suit your needs best.
- Use a free trial. Test a data room and its features to see it in action and make sure you can use it for your M&A project.