Importance of Virtual Data Rooms for Mergers & Acquisitions

The modern world and humanity as a whole are actively and purposefully moving into the virtual world, which simplifies many processes, both in everyday life and business. The financial world is no exception, which needs to keep a large number of confidential documents in one city.

Why It Is Important to Use Virtual Data Rooms for M&A?

Before the advent of the Internet, files were stored in physical data rooms. These rooms required additional costs, such as rent, a lot of paper, staff, and more. The costs were also borne by professionals who wanted to use such rooms to view financial documents. Not only did the users have to spend time and money to get to the room, but they also had to book in advance and view a large pile of documents. With the advent of the Internet, this inefficient approach was refuted and the process was transferred to the virtual data room.

Today, virtual data rooms are used as a standard solution for secure document exchange. Compared to a traditional data room, virtual rooms can simplify access to documents, eliminate travel, and reduce the cost of managing access rights. More importantly, virtual data rooms allow multiple transactions to be closed simultaneously in a shorter amount of time.

There is no single right way to organize M&A processes, but there are proven best practices that can be combined to get a strategically correct approach to technology deals – recommendations for deals with technology goals can be summarized as follows:

  • It is necessary to create the right corporate organization to find, fulfill and integrate innovative technology goals, including strategy, processes, tools, investment team;
  • You need to follow a clear and focused strategy that takes into account the digital transformation of the company as a whole so that digital acquisitions harmoniously fit into the structure and activities of the buying company;
  • Investment teams should pay more attention to researching the operating model of the acquired company prior to entering into a sale and purchase agreement to identify potential risks in HR;
  • Companies should rely on external technology experts to broaden their targeting of new technologies and industry segments and to leverage expertise early in the deal and throughout the process.

The Process of M&A Transaction Improving with VDR

By using the virtual data rooms for mergers and acquisitions users can use two-factor authentication mechanisms. The actions of all users and system administrators are logged, logs for an arbitrary period can be freely downloaded and analyzed by the customer. Moreover, the logs include actions performed not only in relation to stored files but also atomic actions up to the administrator changing individual service settings or attempting to enter a password incorrectly when authorizing a user. Naturally, when corporate data is stored on the side of the provider, it is difficult to talk about complete trust on the other side. However, it is also worth considering what technical security mechanisms are used by the service provider and what authority it has over the stored data.

In general, digital data rooms for M&A are shifting the focus from the transactional to the strategic aspect of the transaction, and while digital tools are not a guarantee of increased transaction value, these technologies provide a smoother post-integration experience, lower costs, and shorten time to completion. Such attributes can be especially useful in cross-industry transactions in which the companies involved in the transaction initially exist in different markets.