Mergers and Acquisitions With a Virtual Data Room

Commonly referred to as VDR, a Virtual Data Room, this is a repository of online data which servers the primary purpose of storing sensitive documents about a particular company. On most occasions, VDR is employed so as to improve and enhance the whole process of due diligence, especially during loan syndication, M&A transaction, venture capital or private equity transactions. For quite some time now, the due diligence procedures have been using the traditional and physical data room so as to conduct the disclosure of sensitive documents. However, for specific reasons such as security, efficiency, and costs, VDRs have exclusively replaced the more conventional data room. So today in this particular article, we want to discuss in excruciating detail, all you need to know about this unique online data room and how it is important for a company.

So what does the term virtual data room refers to?

First, before we can define what VDRs are, perhaps let us know what a data room is. Typically, an online virtual space refers to a physical space where a company or business can display some of its most confidential data, in a controlled way to a number of potentially interested parties. As such, a data room is usually used for mergers and acquisitions, (M&A) where sellers and their the companies they are buying from are required to reveal vital information regarding their firm or asset to many interested potential buyers simultaneously. Virtual data rooms are often filled with the selling company’s critical documents including contracts information, employee information, financial statements, intellectual property data, and capitalization among others. This technique allows you as the sales company to display valuable and sensitive information in a highly controlled environment so as to help preserve confidentiality.

So, VDR is a virtual space which serves as a physical room for data, only that the information is securely hosted online. Previously, before virtual data rooms emerged, M&A prospective buyers were forced to physically visit an actual place personally, so as to critically review the sensitive documents and carry out the necessary paperwork. But, this is now a thing of the past since many buyers can always access all the confidential data online simultaneously.

Due diligence, as used in the context of M&A, involves the disclosure of critical data by the selling company to its prospective buyers or parties. To be more precise, it refers to the process of ensuring that involved parties in the transaction are fully aware of all the relevant information before a final deal can be struck between them. During the process of due diligence, every single document concerning the present, past as well as future activities of the company or business must be made available to every potential bidder. Of course, the primary objective is to ensure openness and transparency, while still guarding the interests of the business.

Who are the vendors of online data rooms?

It is imperative to note that there are numerous online vendors of data rooms such as Merrill Corp, Ansarada, Box, ShareFile, RR Donnelly, Intralinks, and Firmex. Most of these vendors of online data rooms typically charge based on the length of the time that your data room will be in operation and the amount of storage used. Individual law companies having sophisticated M&A practices also offer private online data room for their esteemed customers. By using a data room exclusively and typically designed for M&A, you will enjoy a host of incredible features specifically created to make the M&A due diligence more secure and straightforward. This implies that your potential buyers trying to access your online data room will find a professional looking system where they can make informed decisions faster.

So what are some of the main advantages of adopting virtual data rooms for your business?

The first virtual data room developed was mainly used for securing debt underwriting files. Nowadays, every company practically uses virtual data room. Below are some of the valued benefits which virtual data rooms offer.

5. An unmatched level of security.

Arguably, this is the main reason why individuals use a virtual data storage. It only offers access to approved entrants, keeping the unwanted persons out. They are used by high-level projects to keep, secure and retrieve sensitive information which requires maximum protection such as capital funding, due diligence, medical field clinical trials, mergers and acquisitions and more. Simply put, they add more layer of protection to company’s confidential data, and this eliminates the likelihood of the occurrence of illegal viewing as well as sharing.

4. Prompt transactions.

Apparently, businesses always value to conduct their operations as quick as possible. Data rooms facilitate this experience, bearing in mind that online data rooms are accessible to every remote user all over the globe. This implies that geographic barriers can no longer deter the quick creation, editing and the reviewing of vital and sensitive documents.

3. It facilitates due diligence incredibly.

All the steps which need to be followed so as to be in compliance with the legal requirements before any transaction can take place are significantly enhanced when virtual data rooms are involved. In short, virtual data rooms create an automatic log which allows for the verification of all the legal requirements regarding due diligence compliance.

2. It is cost-effective.

Immediately VDRs were instituted, business started to save significant sums of money. The total costs associated with real file rooms, such as printing, copying, monitoring on-site security, powering of office instruments and other machines are all eliminated with the help of virtual data rooms.

1. It facilitates transparency in transactions.

With mergers and acquisitions, there are often lots of details involved meant to ensure that whatever is being sold is clearly understood and fairly priced. Especially for the potential buyers, it allows them to identify earlier some of the presumed pros and cons of a particular item and review their interests. What’s more, it ensures that each and every prospective buyer enjoys equal access to the same information.

The Bottom Line.

Since their introduction, the influence of virtual data rooms has been increasing steadily. In fact, currently, they are indispensable especially when it comes to the process of due diligence. They are essential in facilitating significant deals across the continents and efficiently keep every procedure taken during any transaction process. With the ever-increasing technological advancements, we can only expect its performance to improve even as time elapses.

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