Things to Prepare in Virtual Data Rooms in M&A Transactions

Based on data from the Institute for Mergers, Acquisitions, and Alliances, there were around 49,000 mergers and acquisitions (M&A) deals completed worldwide in 2018. The value of these transactions rose by 4% to 3.8 trillion USD. Since 2000, there were over 7,90,000 M&A deals around the world worth more than 57 trillion USD.

The use of Virtual Data Rooms (VDRs) in M&A deals is growing due to its many benefits. The continuous advancements in technology also allow VDR providers to improve the features of their services.

Virtual Data Rooms image for article 49392992b2Reasons Why Companies Buy or Merge With Other Firms

Business enterprises often acquire or merge with other firms to develop synergy. Usually, the resulting company has more resources, better economies of scale, and a broader market presence. Here are other common reasons why an entity purchases or merges with another firm:

  • Branding presence or power – Many companies combine with an established brand to boost their corporate images and expand their markets. By acquiring a valuable company, they can immediately make use of the benefits of the brand as their own.
  • M&A industry player – A company involved in M&A purchases another company as an investment to gain profits. Among the M&A entities are hedge funds, holding firms, business development companies, and private equity.
  • Geographic expansion – Businesses planning to expand in other territories buy companies in the related areas to quickly establish their presence.
  • Technology expansion – A firm which wants to use a patented technology may find it more convenient to merge with the business owning the patent.
  • Product-line expansion – A business can expand its product offerings quickly by acquiring or merging with another business. For example, a snack manufacturer may purchase a soft drinks producer to gain entry into the beverage market.

List of Documents to be Included in Virtual Data Rooms for M&A Deals

VDRs are very useful in M&A transactions due to their benefits like cost-saving, document accessibility, and data security. However, preparing your VDR for a deal may consume your time due to the number of documents you need to include. Here are some of them:

  • Primary Business DocumentsYou should prepare your corporate files such as the certificate of incorporation, business licenses, list of officers and directors, and business permits.
  • Security Ownerships like Capital StocksThe documents should comprise of stock purchase agreements, voting agreements, shareholder list, and option holder list. Other files contain securities law filings and permits, stock certificates, stock option agreements, and stockholder agreements.
  • Financial and Taxation Records – You must add your financial statements and tax files. These documents consist of capital leases, security agreements, and bridge financings.
  • Personnel Records – These include the names of employees, benefit plans, and collective bargaining agreements.
  • List of Insurance Policies – This list should contain pending insurance claims and any captive insurance programs or self-insurance programs.
  • List of Material Agreements – Prepare documents like leases, inter-company agreements, privacy policy, and terms of web site use agreement
  • List of Suppliers and Manufacturers
  • List of Property and Assets
  • List of Intellectual Property (IP)
  • List of Customers and Vital Metric Data
  • Litigation and Dispute Documents (if any)

Using Virtual Data Rooms in M&A negotiation can facilitate the completion of your deal. However, you should prepare all the necessary files to avoid issues that can impede your progress.


Interesting related article: “What is a Takeover?