Wait time, repeat requests, and sharing tens and hundreds of files is something dealmakers can easily relate to. A merger or an acquisition is a time-consuming process, and it can get longer if there is no proper channel for communication and data sharing. Big thanks to virtual data room technology, M&As are much faster and safer now.
For some, virtual data rooms may be a new term, but experienced dealmakers are well aware of the benefits of online data room software in the M&A industry. In the text to follow, you will be able to learn how data room software helps manage M&As more efficiently.
What is an electronic data room?
Electronic or digital data room for M&As is a cloud-based data management solution for safe and controlled data sharing, distribution, organization, and management. In addition to data management, virtual data rooms act as a central platform for communication during transactions.
Data room technology is not just limited to mergers or acquisitions; you will find them serving different purposes in almost every business sphere. Common applications of VDRs include:
- Real estate management
- Asset management
- Risk management
- Biotech licensing
- Joint ventures
- Due diligence
You can learn more about M&A and data rooms, their various benefits and specific features facilitating these transactions here (link).
The role of data room software technology in mergers and acquisitions
The fact that data room vendors are somehow involved in almost every M&A transaction around the globe shows how important this technology is in the M&A industry.
We all know that all mergers, acquisitions, and similar deals involve procuring, exchanging, and analyzing an avalanche of documents.
A virtual data room software equally assists all the stakeholders — buyers, sellers, intermediaries, investment banks, and dealmakers — in making deals more streamlined, smooth, and efficient.
Benefits of using data room software in M&As
VDRs address different processes in M&As and make them simple and fast — here is how.
Fast exchange of information
Paper documentation is not a choice for dealmakers anymore. This document-sharing process usually takes a few days or even weeks for international transactions.
Dealmakers and businesses prefer virtual data rooms as they allow them to share, access, distribute or exchange massive volumes of data within no time.
What’s more, virtual data room providers nowadays offer bulk uploads, and drag-and-drop features in VDRs make it possible to upload and share a large number of documents simultaneously.
It is understandable that sellers often feel hesitant to share secretive or confidential information with buyers or dealmakers. Ordinary data-sharing platforms and email services give sellers absolutely no control over their information. Once they share the data, it is out of their control.
On the contrary, hiring secure data room services allow target companies to keep things under control. That’s because they can:
- Limit access of any user(s) according to their needs.
- Revoke access to any document at any time without even informing the users in the VDR.
- Hide sensitive or confidential parts of the document through fence-view mode.
- Prevent users from sharing, copying, editing, altering, or printing any document without permission. They can’t even take screenshots of the documents unless the VDR management allows.
- Use built-in NDA templates and force buyers to follow the privacy contract.
Electronic data rooms also prevent user identity issues through features like multi-factor authorization, remote device purging, IP access control, and granular access.
Better collaboration between stakeholders
Data room technology solves arguably the biggest challenge in dealmaking — communication. A two-way flow of information between all concerned parties is necessary for efficient M&A transactions.
Here is how the data room ensures everyone involved in the process is connected all the time.
- Sellers, buyers, shareholders, and intermediaries can easily hold online meetings, and VDRs can accommodate tens and hundreds of users in those meetings.
- The Q&A module in the data rooms is specifically designed to facilitate a real-time, two-way question/answer session between stakeholders.
- Participants can even use chat messengers for private and group communication.
Better organization and analysis of data
Data room software gives the sellers comprehensive analytics related to the usage of documents in the VDR. They can determine the interests of the buyers and then respond to them accordingly.
For example, VDRs show which documents buyers visit the most and how much time they spend on them. It helps sellers organize their data according to buyers’ preferences.
Reduction in expenses
Where digital data rooms make things faster and more efficient, they are cost-effective in different ways. They help dealmakers minimize the costs of transactions by reducing paper, printing, and distribution costs. The online meeting management tools minimize the need for physical meetings between stakeholders.
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Consider using a data room for your next M&A transaction?
DealRoom, Intralinks, CapLinked, Firmex, FirmRoom, SecureDocs, Merrill, and iDeals are some of the best data rooms for secure and efficient M&As. However, it is essential to independently compare virtual data rooms for making an optimal choice of a solution.