The estimated time for an M&A transaction to complete is between six to twelve months. In fact, it may take a few years for the buy side to complete the transaction fully in all aspects. The process is not only long, but it is tedious as well. The time span even elongates if the transaction is not managed properly. That said, repetitive tasks, ineffective data management, and faulty communication channels waste time and kill the chances of successful deal closure.

One way to avoid all these things is to employ tailor-made solutions for M&As — virtual data rooms. Virtual data room software not only simplifies the process but also boosts the chances of successful outcomes.

Let’s explore the benefits of virtual data rooms in M&As after a brief introduction to data room technology.

What is a virtual data room?

Virtual data room or data room software is a certified virtual document repository for safely storing, sharing, and managing business data.

In broader terms, it is a modern-day, cloud-based data management solution that helps businesses, dealmakers, investment bankers, etc, to automate secure data management processes in complex transactions like IPOs, mergers, acquisitions, fundraising, tenders, etc.

Data rooms are comprehensive deal management solutions that provide communication, data, and deal management tools in one place. That is why they are a global data management solution for mergers and acquisitions. Modern-day virtual data room providers even offer specialized sell-side and buy side M&A data rooms.

Key 5 benefits of a virtual data room

Following are the key benefits of employing virtual data room solutions in M&As.

1. Streamlined due diligence process

Due diligence is the most important part of the whole process. It is a stage where the sell side and the buy side or merging companies examine each other from operational, financial, and legal perspectives. At this stage, both sides share a massive volume of information with each other. Secondly, there are a lot of arguments, cross-questioning, and explanations.

In traditional methods, the due diligence documents are shared in paper form. This method is expensive, ineffective, and insecure. Virtual data rooms eliminate all these things.

Here is how data rooms streamline the due diligence phase:

  • VDRs allow the sell-side to deal with multiple buyers at a time. They can share due diligence data with multiple bidders simultaneously. It reduces the need for physical meetings, and buyers don’t have to wait for their turns to examine data. It ultimately leads to high success chances.
  • All high-end data room providers ensure smooth and safe communication in due diligence via tools like Q&As, in-app messengers, discussion boards, etc.
  • The sell side can easily track the activities of the buyers. It allows them to assess which buyers are more interested in the transaction so that they can focus on them.

2. Improved confidentiality and security

Mergers and acquisitions are highly sensitive business transactions that require airtight security. The problem with paper documentation or using free tools is that the data is easy to steal. However, using a certified online data room provider can minimize or even eliminate security threats. Here is how.

3. Strict login procedure

The log in process in the dataroom technology is secured by a two-step verification process. The users have to use not only the correct password but also a one-time generated code sent to their devices. When someone tries to log in from a new device, the message is sent to the user’s email address or currently logged-in device. It alerts the concerned user immediately.

4. Control over VDR data

The control that a virtual data room gives you over your business data is irreplaceable. You will have 100% control over due diligence data, even if you are dealing with multiple bidders at a time.

For example, the data room administration can:

  • Define access level for every user based on their roles and responsibilities.
  • Set restrictions regarding sharing, deleting, downloading, saving, editing, or printing a file(s).
  • Create self-destructive documents that are automatically deleted from the browsing history as well.
  • Protect ultra-sensitive information through fence-view mode.
  • Revoke document access whenever needed.

5. Efficient collaboration and communication

Another thing that makes data rooms a better option is that they allow everyone involved in the transaction to share data and communicate on the same platform. Here is how.

  • You can arrange meetings with buyers, advisors, dealmakers, etc. Data rooms have built-in meeting management tools for highly efficient meetings.
  • Investors and key stakeholders can also participate in the communication process.
  • Users can use end-to-end encrypted in-app messengers for personal communication.
  • Every M&A data room has Q&A tools specifically designed for such types of transactions.

What’s more, all the teams in the M&A process can safely collaborate using virtual data rooms.

Summing it up

M&A data rooms are online deal management solutions used to streamline data management, due diligence, and online communication in M&As. Some of the best M&A data room providers include iDeals, SS&C, and Datasite.