How a Virtual Data Room Supports Better Mergers and Acquisitions in 4 Ways
Companies that share, store and analyze mass amounts of data and documents throughout M&A deals. Specifically during the due diligence part of a merger or acquisition process, those involved in the deal must have eyes on thousands of pages of information.
On top of this, all of the pages must be easily accessible, accounted for and securely stored.
Historically, data rooms were literal storage rooms in office spaces or storage facilities. Each deal’s data would be housed in its own room, often in the form of printed documents and excel sheets. The pages were manually indexed and filed in banker’s boxes.
As one can imagine, these physical data rooms were cumbersome and inefficient, especially in the wake of technological advances and software developments in the early 2000’s. Some of the problems that physical data rooms gave companies were increased costs, wasted time traveling to the facilities for document access and inconvenience. In addition, traditional data rooms left companies vulnerable to security breaches and lost documents in the event of a break in or natural disaster.
To solve the problems of traditional data rooms, virtual data rooms (VDRs) have been created over the past several years. Now, companies can use software products like FirmRoom to host due diligence documents on a cloud-based platform. This allows all deal-related documents to be uploaded electronically and securely stored in one place for easy access. With a VDR, sellers of a company or its assets can provide necessary information to potential buyers to close the deal.
Ditching physical space in lieu of VDRs has revolutionized the way M&A deals are done for many companies. With FirmRoom, we’ve helped many clients increase accountability and efficiency during mergers and acquisitions. FirmRoom encourages a better M&A process because it:
How Virtual Data Rooms Save Time
VDRs save time at almost every stage of a merger or acquisition. Documents can be filed much more quickly, accessed without travel time and shared/saved at the simple click of a mouse.
This allows important players in the due diligence process to focus on what’s important and work smarter towards a faster time to market. Saved time might also translate into less fiscal hemorrhaging during an M&A deal.
VDRs Save Storage Costs and/or Office Space
With VDRs, companies no longer have to pay for storage costs or use their own office space to house documents. Physical storage space adds up quickly over time, while hosting a VDR with a fair and predictable monthly or project rate is more manageable.
Data Rooms Promote Document and Data Security
When it comes to establishing the highest safety and security standards during an M&A deal, VDRs are a company’s best bet. They are created with strict security features to keep sensitive and confidential information safe, giving executives, consultants and investment bankers peace of mind.
Whereas the security of physical data rooms was a constant source of worry, VDRs are resistant to immune to security breaches, compromised data or stolen/destroyed documents. Additionally, M&A documents and records need to be saved once the deal is complete – something a VDR from a trusted provider does in one secure place. Ultimately, a VDR is a highly recommended tool to protect a company from hacker infiltration.
Virtual Data Rooms Increase Productivity and Oversight
Many VDRs have built-in tools that enhance and centralize communication that may reduce the need for emails, conference calls and meetings. They also include features that allow for sellers to share sensitive documents that would not be safe to send via email. Furthermore, all document management related activity can be tracked by administrators to ensure adequate oversight and prioritize accountability.
VDRs Promote Security, Efficiency, and Accountability during M&A Diligence
The use of VDRs like FirmRoom was and continues to be one of the most long-standing trends in M&A over the past few decades. VDRs are designed specifically to promote security, efficiency and accountability during the due diligence stage so that M&A leaders can focus on what really matters: Closing the deal. Overall, for companies looking to better their M&A process, implementing a VDR is perhaps the best first step.