Image source: serbaviral.xy

Virtual Data Rooms for M&A

Businesses are always looking for quicker and more efficient ways to close a deal. Mergers & acquisitions (M&A) often require a lot of documentation, communication and information sharing. Data rooms (VDRs) save companies a lot of time and money so that they can close the deal. Technology enables people to limit access to documents, share information and ensure due diligence is followed during a M&A deal. The following are just some of the many reasons why both small and large organizations around the room are using virtual data rooms.

What Are VDRs?

Image source:

Businesses today are moving away from using filing cabinets and a paper trail to do business. There are just too many variables to manage: the time it takes to physically go and find documents, human error, and access or security issues. A VDR is where scanned copies of documents live. With the click of a button, people can pull up financial reports and other documents. They do not have to be in the office to do this, and they can easily share documents with other people. VDRs save a lot of time and ensure that documents are always safe and access is controlled. 

VDRs are based on an extranet, which is a site with highly controlled access. Its main advantage is accessibility since it can be used from anywhere in the world. The admin can configure various levels of access. Some users have read-only access, while others can print or even edit documents in a virtual data room.

The Power of Due Diligence

Whenever a deal is in play, businesses have to make sure that all of their ducks are in order. This means going through hundreds if not thousands of papers: from budgets and reports to expenses and tax forms and more. If one company is acquiring another, they want to make sure they know the full history and financial health of the organization. A decade ago, business leaders would sit in hotel or conference rooms and go through three-ring binders and boxes to find key information. It was like looking for a needle in a haystack. Thanks to virtual data rooms, if an executive wants to see expense reports from the last five years, all it takes is a quick search. Sellers can more easily share information and buyers can cut down the time it takes to close the deal. 

Setting VDR for M&A deal

image source:

A well-organized virtual data room can help you immensely with an M&A deal. It is possible to have your VDR on cloud solutions like Dropbox or Google Drive, but it isn’t optimal. Renting a proper VDR from a vendor will not only allow you to use features like audit logs, version control, and digital signatures, but it will leave a much better impression on your partners. After letters of intent have been submitted and the best offer is chosen, the due diligence process can commence. It will shorten the due diligence process considerably and make it easier at the same time. Once that process is complete, the prospective buyer will get full access to the virtual data room and can examine all important files. Structuring VDR correctly can also have an impact here. Legal documents should be separated from human resources files, for example. There is no need to pile together intellectual property documents with the ones dealing with engineering and support. By reducing the clutter and having a clear organizational scheme, the entire M&A process can be fast-tracked.

Close the Deal Quickly

Both buyers and sellers want to close the deal quickly, which means sharing information and contracts. A virtual data room not only streamlines this process it also makes it easier to share documents with potential bidders around the world. Business does not have to happen in person. When data can be shared and reviewed quickly, the evaluation and bidding happen quicker too.

Control Access to Information

Virtual data rooms protect companies’ confidential or proprietary information. A company can easily provide access to a would-be buyer so that they can see contracts and reports and then remove this access. Security breaches are unlikely to happen thanks to the latest technology. The documents cannot be photocopies or damaged in process, and data efficiency is increased overall.

Legal Compliance

When an M&A is happening, companies not only have to meet one another needs but also comply legally. Virtual data rooms make it easy to communicate with the Board of Trustees or leaders in the company. If a company has a legal question, it can share key contracts with lawyers to ensure everything is on the up and up. Technology allows people to make sure they are always in line with local, federal, and international regulations.

Cut Costs and Increase Profits

Image source:

Lastly, a data room like Firmex helps companies cut a lot of costs. People do not have to spend money on travel just to share documents, and a lot of employees can work from home or a meeting versus coming into the office. The amount of manpower needed for an M&A is sliced in half, which means employees can work on closing the deal or on other projects. And of course, the big win here is that the deal is closed quicker, which not only saves time and energy but also stress. 

Finally, there is a cost to the environment. By having all important files on the internet, there is no need to make countless paper copies, reducing paper consumption significantly. Add in the printing cost and lost man-hours on this task and virtual data room can make a real impact on a company’s bottom line.

Virtual data rooms are designed so companies can keep their data private and make the most of their deals. Once information is loaded, companies have immediate access to information. Documents and data are labeled and organized. Having detailed reporting features and being able to track user activity ensures that information is protected and a merger & acquisition can happen without a hitch.