Virtual Data Room: How to Successfully Manage Your M&A Activities

What are mergers and acquisitions?

In the current economic situation, mergers and acquisitions (M&A) of companies are one of the most common development paths, one of the main growth strategies used by even the most successful companies. The process of reorganization in the form of M&A deals is now gaining momentum and is becoming completely commonplace. Every day, more and more enterprises, in an effort to increase their scale, save costs, and obtain synergy effects, are choosing a strategy of mergers and acquisitions, which allows them to maintain their existing positions in the market and become leaders.

A merger is understood as a process as a result of which two or more companies are merged into one, accompanied by the conversion of shares of the merging companies, while maintaining the composition of the owners

A takeover is a transaction assuming that the acquiring firm remains a legal entity, and the absorbed one is liquidated while transferring all property, liabilities, debts to the first one. Acquiring a company obtains ownership of the company by buying up a controlling stake.

What is Virtual Data Room software?

Cloud resources are easily integrated into a single array that can be customized and managed according to tasks and open up new opportunities for storing information. A Virtual Data Room also called a digital or electronic Data Room, is a password-protected, cloud-based Internet application for the secure storage and exchange of secret and confidential documents within companies, authorities, or courts.

When we compare Virtual Data Rooms we will see that their functions are based on similar principles.

The best Virtual Data Room is used as a tool:

  • due diligence of corporate transactions (mergers and acquisitions, bankruptcy and disintegration, loan syndication, real estate sales, etc.);
  • audit and compliance (compliance control);
  • confidential business communications, when it is necessary to provide access to a single source of information for several users from any geographic location.

Why does modern M&A require a Virtual Data Room?

A Virtual Data Room is traditionally the main tool of an M&A advisor, auditor, real estate company, investment company, and family office. Virtual Data Room software for M&A deals plays a role of a progressive tool widely used in practice both to ensure transparency and to reduce time and property costs,

The practical need for its use is because to prepare an initial public offer, conduct an audit of a transaction participant, familiarize with the documents of potential buyers of shares of an additional issue, it becomes necessary to provide access to certain documents to interested parties.

A feature of the Data Room, which ensures the preservation of the information provided from unauthorized copying, printing, and distribution, is the presence of built-in tools that block the Content Copy/Extraction and PrintScreen functions, as well as watermarks. Besides, the best Data Room software ensures security even in the event of cyberattacks.

The top of the best Data Room providers for M&A comprises the following options: DataSite, IDeals, DealRoom, Intralinks, Drooms, Ansarada, Firmex, Imprima.

What are the benefits of using Data Room for M&A?

Electronic Data Room for mergers and acquisitions is in great demand in the field of new technologies, so it has advantages and disadvantages. Here are the main advantages:

There are the following advantages of M&A data room services:

  • Speed of transactions. Online Data Room software accelerates the implementation of transactions and enables access to the information for an unlimited number of interested parties or business partners.
  • Safety. The website enables clients to follow the progress of access and access authorizations as well as control the rights to insert, process, copy, forward, or print the shared documents. All documents are provided with digital signatures, watermarks, which prevents unauthorized processing.
  • Encryption. Ideally, Virtual Data Rooms store only a set of encrypted data identified only by meta-information, and the keys are stored on a separate key management server. Data with encryption keys intersect only on the client-side.
  • ●      Flexibility. M&A data rooms automatically draw attention to the newly saved data and thus enable the immediate denial or restriction of access rights to the specific documents.
  • Availability from different devices and user-friendliness. To take full advantage of technology, it is enough to have access to the Internet and have a device that has an Internet browser.
  • Backup and Recovery: The cloud service provider may allow a higher level of backup and recovery than that provided by traditional data centers, as well as provide on-demand backup storage.

How to choose a Virtual Data Room provider?

There is a large number of Virtual Data Room providers on the market. However, there are a few things to consider when choosing the software. Before making a decision, the certifications and security assessments of the potential service providers should be carefully examined.

ISO / IEC 27001 and 27002 are generally considered to be the highest level of information security. Ideally, a provider can demonstrate this. These certifications are not just about numbers. Rather, they represent the promise of an independent authority that the software or the tool that is used ensures the greatest possible security when handling sensitive data.

In addition, many applications promise that integration with other platforms is possible without any problems, but the security precautions must also be carefully checked for these integrations. Because of course it is not a problem to integrate a public e-mail service such as Outlook or Gmail, but it should be weighed in advance whether this is desired. In addition, data synchronization with other platforms or tools can also weaken the security of the selected Deal Room software.

Conclusion

There are many effective ways to run a business. The most rational option is complex automation of processes based on the own or adapted model of the Data Room software. The use of such a service can increase the profitability of production and significantly reduce costs during M&A deals.

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