The market for mergers and acquisitions (M&A) requires secure and reliable technology to make the process efficient and easy. Any business engaging in this market needs a platform to share their information and carry out due diligence. The virtual data room (VDR) has had a massive impact on this step in M&A transactions, but it wasn’t always this easy:
Physical data rooms
In the past, buyers and sellers would have to arrange a meeting at a pre-determined location that’s now become known as a physical data room. While here, the sellers would present the hard copies of business documents. The buyers had an allocated time to view these confidential company files and make a decision on whether or not to invest.
Seller and buyers were required to meet face-to-face, which meant that both parties could incur considerable travel and accommodation costs if they were based in different parts of the world. Multiple deal rooms and meetings had to be scheduled one after the other, and the seller’s representative had to be onsite to ensure the confidential information wasn’t being copied. Any form of photocopying need to have prior approval before the meeting took place.
Virtual data rooms (VDRs)
As the years went on, VDRs became the industry standard for sharing sensitive information. They’re fast, efficient, cheap and more convenient. But how do they work?
When engaging in the M&A process, a company will seek the expertise of VDR provider. Organizations like Imprima provide virtual data room services for companies of any size. The VDR provider will then host the seller’s confidential company files in a secure online repository. This web-based platform will usually be protected by encryption on the same level as banks and adhere to respective data protection laws for different countries.
All the interested buyers are given unique log-in credentials, so that they can access the company files at their leisure.
Benefits for sellers
The old method of physically gathering, printing and organizing financial documents is no longer necessary. Now, sellers can simply upload the digital copies of these documents to the VDR with minimal effort. They just need to ensure that all the files are properly named and organized.
To maintain the anonymity of the interested buyers from one another, a seller previously had to hire separate rooms and intelligently schedule the meetings. A VDR eliminates this headache by allowing buyers to view the files online 24/7, without ever knowing who else is also looking at them.
Sellers are also provided with ability to control who can see what information and how long for. Restrictions can be applied to prevent the files from being copied, printed or forwarded.
Benefits for buyers
A web-based platform means that buyers don’t have to waste time and money traveling to a physical location. This speeds up the negotiation process considerably.
A VDR also provides an ease-of-use benefit that the physical room could never provide. Buyers don’t have to painstakingly sift through unorganized documents in order to find the information they need.
[Image credit: sheelamohan, FreeDigitalPhotos.net]