As the investment forecast for M&A deals is forecasted to remain strong for the nearest future, businesses look for ways to close deals more quickly and cost-efficiently while maintaining competitive edge. As a result, there has been a growing demand to minimize the length of time usually scheduled for due diligence during the M&A deal process.
Consequently, the virtual data room industry has been motivated to improve technology and services in order to help businesses reduce the costs, time, and efforts normally involved during M&A deals. That’s how technology advancements impact the way M&A due diligence is completed using the virtual data room solution.
Due diligence remains to be the most critical step in M&A deals, and for decades it has been done in a very cost-intensive and time-consuming manner. Until approximately 10 years ago due diligence was mostly done in in paper-filled hotel rooms or offices where a team of lawyers, analysts and bankers would have to go through boxes full of three-ring binders or even worse than that, boxes full of uncategorized contracts, budgets, reports, and any other confidential corporate documentation being provided by the seller to the buyer for their consideration and ultimately the decision making.
As all parties were under pressure to close deals quickly, among reasons being the need to minimize the expense of large teams living and traveling abroad as well as potential leaks to the media, potential buyers were often prone to making dangerous errors while performing due diligence.
Some of the benefits of virtual data room for mergers and acquisitions include:
- Maximized value of the M&A deal
- Providing access to greater number of potential bidders in a shorter period of time
- Data evaluation process during M&A is easy and quick
- Improved data and access security provides peace of mind for both the sell-side and the buy-side teams
- Confidential corporate data is kept secure using advanced digital tools and protocols
- Documents in the data room cannot be copied thanks to applied watermarks and partial screen blocking
- Overall, maximized deal efficiency, compared to the paper process
- Full compliance with local and International regulations
- The data room keeps track of all actions inside the room. Every action done by invited participants is fully audit
- Improved team Coordination. Tool to coordinate all communication • Deal Intelligence, to understand bidder’s interest
When it comes to cost reduction and improved cost of the M&A deal, virtual data room solutions offer a specific set of value points:
- Since data is stored in cloud, due diligence-related travel expenses for bidders and investors are eliminated
- Travel time and expenses between advisors and company are also reduced
- Sometimes it’s difficult to recover travel costs while the consistent and recoverable costs of a VDR keep the deal costs under control.Transaction time during the M&A deal is also reduced thanks to improved technological side and the ability of parties to communicate inside the protected data room space:
- VDR optimizes multiple party due diligence working in parallel
- Eliminated travel costs and delays — all parties begin to study data room documents immediately after its setup
- Most virtual data room providers for mergers and acquisitions offer immediate launch, easy setup and incremental rollout
- During the M&A deal in the virtual data room new bidders can be added at any time
Because of the global nature of today’s deals, a great advantage of virtual data rooms for M&A is their ability to greatly increase exposure of the deal to all interested parties regardless of their location:
- Numerous bidders and investors can be involved at once even when they are located at different time zones and continents
- The deal when located in the data room can reach beyond country borders
- The deal owner can invite bidders without facing any incremental cost
Thanks to the virtual data room solutions, both sellers and buyers benefit from the technological break-though as a result of massive adoption of virtual data room solution for M&A. Being cloud-based, highly secure, and intuitively easy to use equivalent of the old-school paper-based data room, the virtual data room solution for M&A permits seller team to quickly, easily and securely upload data including documents and scanned versions of paper-based contracts or reports, to a cloud-based secure data repository. Using any web browser, expert teams can access this repository from anywhere in the world to efficiently retrieve disclosure documents. By reducing costs and travel time, improving exposure to potential bidders and investors worldwide and decreasing the time when the M&A deal becomes available to the market, a virtual data room solution can greatly minimize costs at the same time maximizing the deal value for clients.