Mergers and acquisitions use different methods of a company valuation. Initially, online data rooms were created as an alternative to physical data rooms during M&A due diligence. Mergers and acquisitions procedures are the most common use of VDRs. These repositories provide their customers with a safe place for the due diligence required during the completion of a transaction.
Why do M&A negotiators Need Online Data Rooms?
M&A processes are innovative. This is confirmed both by the specifics of their emergence more than a hundred years ago, as well as the improvement of the technologies for their implementation with each new wave of integration of business entities. Negotiators point out that fruitful business meetings require not only innovative strategies, and due diligence at all levels but also well-designed integration plans. In M&A transactions, both the seller and the buyer parties need easy access to confidential documents to complete the due diligence process and meet expected closing dates.
Virtual data rooms imply authorized access to a common source of information by several users. Such a program ensures the preservation of the information provided from unauthorized copying, printing, and distribution. It features the presence of built-in tools that block the Content Copy/Extraction and PrintScreen functions, as well as watermarks.
Criteria for Selecting an Online Data Room for M&A
If your company needs a virtual data room for M&A and other business activities, you need to decide on a provider, i.e. an organization that will be responsible for the reliability and safety of your documents. You need to choose a provider according to the following criteria:
- cost: to obtain objective data, you need to compare offers from several companies, not forgetting other factors;
- technical support: it should be round-the-clock, which is easy to contact and solve the problems that have arisen;
- the possibility of converting existing documentation into electronic format;
- experience of the company: it is determined by the presence of ready-made projects so that your virtual data room is not the first and this does not lead to problems;
- a simple and intuitive interface that does not require special knowledge and skills, so that each user can work freely;
- virtual data rooms “for your case” is not a standard product but a development with flexible changing functionality;
- security of hosted data: the level of protection for providers is approximately the same, but it still needs to be clarified.
Benefits of Virtual Data Rooms for M&A
These business transactions involve a large number of documents, many of which are confidential and contain sensitive information. Using VDR is a safe and secure way for all stakeholders to view and share documents during negotiations. Let’s take a look at the most obvious benefits of virtual data rooms:
- each virtual data room is “managed” by a manager who provides clarifications and monitors the progress of the transaction;
- if necessary, the company provides the ability to easily make changes to the project;
- a high degree of document protection when dealing with M&A transactions through virtual data rooms;
- a simple interface;
- the cost varies within reasonable limits.
How to Work with Virtual Data Room?
After the choice of the provider is made, and all the details are clarified, you can proceed to the direct creation of the project. If necessary, documents are converted into electronic format. Then, an almost finished project is filled with documents, access rights are created for them, their performance is checked, and the virtual data room is transferred to the customer for testing. After the work is approved and/or changes are made, the provider trains the customer to work with the virtual room, after which it is possible to distribute access to potential buyers.