M&A transactions usually take weeks or even months because of their complex nature, which involves tons of repeat requests, an avalanche of paperwork, wait-time, and a lot more. However, it is not just about the time — it is the slowness of the process that can lead to errors, data leaks, and may result in an unsuccessful deal even after spending months.
In short, parties involved in mergers and acquisitions need a platform, such as virtual data rooms, where they can collaborate smoothly. They need a secure environment where bidders can access company data easily, and sellers can present information without any fear of data theft. A virtual data room can provide just an ideal environment for that.
So what is online data room software, and how can it help the M&A industry? Let’s find out!
What is online data room software?
An online data room or electronic data room is a cloud-based virtual storage space particularly designed for storing, sharing, and managing corporate documents. The platform not only provides a storage facility but it can be used as a complete virtual working space where users can seamlessly collaborate with each other.
Importance of data room software in M&A deals
Virtual data rooms play a central role in M&A deals worldwide. Mergers and acquisitions are basically all about sharing maximum information with potential buyers or bidders. Online data room software acts as a medium where buyers and sellers can smoothly exchange information and communicate regularly, thus speeding up the deal.
Here are some worth mentioning benefits of virtual data rooms in M&A deals.
1. Secure data repository
Virtual data room is arguably one of the most secure data repositories available in the market. The sellers (in M&A deals) can upload all the necessary information or documents to the data room without worrying about data security concerns. Virtual data rooms secure sellers’ data in multiple ways; here is how:
- Data room software almost nullifies the chances of unauthorized entry with two-step authentication.
- Users in virtual data rooms can send files in an encrypted form.
- The data room administrator can set access restrictions to a specific section of the data room, folder, or even a document.
- The “view only” option in data room software makes sure that nobody can download, edit, or print any specific document.
However, to get maximum security in your data room, try to choose data room vendors that comply with international data security standards such as ISO 27001, FINRA, etc.
2. Easy file organization
Storing files in random folders can literally waste time and cause frustration. It is important for the seller to keep the company data in an organized manner. For that, it is highly recommended to go for virtual data room providers that employ artificial intelligence in their services.
AI helps in organizing the data in a more efficient way, thus boosting the workflow. Not only this, but artificial intelligence helps companies with valuable insights to assess future benefits from the deals and make more informed decisions.
Here is a checklist of documents needed in M&A deals:
- Basic corporate documents such as Certificate of Incorporation, business permits, licenses, etc.
- Capital stock and other securities
- Taxation and financial matters, such as tax returns, audited and unaudited financial statements, etc.
- Property and assets
- Intellectual property, such as trademarks, patents issued, service marks, etc.
- Legal proceedings
- Regulatory matters
- Lists of suppliers and manufacturers
- HR, employees’ records, details of consultants, etc.
- Related party transactions
3. Remote accessibility
Virtual data rooms are remotely accessible. That means bidders or potential buyers won’t have to visit company premises during M&A deals. The seller can add multiple bidders in the data room simultaneously. The buyers can readily access all the necessary information about the company from anywhere and request access to undisclosed information.
Apart from that, virtual data rooms bring more transparency to M&A transactions. The seller can give access to stakeholders and investors so that they are fully involved in the deal process. When all the key players are united at a single platform, deals become more transparent.
4. Overview of the process
High-end virtual data room services make sure that the data room administrators can keep an eye on the complete process. They can monitor data room activities, analyze buyers’ engagement, identify hurdles in the deal process, and track other important things.
However, to do that, you need to choose from the best virtual data room providers. Below are some of the most popular options for your consideration:
- DealRoom
- iDeals
- Intralinks
- Firmex
- Merrill
As a bonus, here is a handy merging two companies checklist for you:
- Company compatibility analysis
- Analysis of corporate culture and work ethics
- Documented model of leadership
- Development of plans for new customers
- Due diligence
- Transparency and integrity throughout the process
Final words
It is not surprising that virtual data rooms have become a vital component in M&A transactions. They are secure, remotely accessible, cost-effective, and can surely boost the deal process. However, to get optimum results, it is recommended to choose from the best M&A virtual data room providers.
