Why Modern M&A Requires a Virtual Data Room

Mergers and acquisitions (M&A) typically require a lot of resources to ensure a smooth transition. The end goal is for one company to purchase the other or both companies to merge together. To reduce the risk of such a transaction, all parties will conduct thorough research before signing the contracts. Previously, this was done using physical data rooms.

Physical vs. Virtual Data Room

During M&A, numerous people will need access to sensitive company files. This group includes chief executives, managers, and other relevant employees. Additionally, the parties of the transaction will include outside professionals, such as lawyers, accountants, bankers, and auditors. Confidentiality is extremely important. With a physical data room, there would be a number of time constraints to let the buyer and seller perform their due diligence separately.

A physical data room also makes it difficult to prevent human error. In the process of examining files, they can get mixed up, lost, or damaged. Theft is also an issue. Finally, it’s difficult to tell if certain documents were edited or replaced. A virtual data room removes all these obstacles and makes it much easier to go through a business merger.

No Time Constraints

When you set up a virtual data room for your M&A, you don’t have to worry about time constraints. All relevant parties can access the necessary documents virtually. This means they can all log in at the same time and perform their due diligence, which can drastically reduce the time needed for this process. The same document can be viewed at the same time by everyone involved, which allows for faster decision-making.

Sensitivity of Data Shared

During M&A, all companies involved have to share sensitive data. It’s extremely important this data doesn’t get into the wrong hands. With a virtual data room, it’s easy to establish personas, profiles, and grant access rights accordingly. You can even designate the type of usage. For example, some people may only view the documents, while others may edit or download them.

With a virtual data room, every document’s actions will be tracked. If changes are made, it’s easy to see which user made the change. If a document is replaced or deleted (if that’s even allowed), you can see who took that particular action. This gives all parties involved peace of mind about the documentation provided.

Security Concerns

Hackers are always a concern when data is stored online. A virtual data room is the most secure online storage available, protecting you from external threats. Of course, sometimes a security breach involves insider knowledge. A virtual data room protects your company from that as well, because every piece of data is tagged and tracked. If you experience a leak of the sensitive data involved in the M&A process, a clear watermark will show you which user leaked the documents.

Modern mergers and acquisitions require a VDR, such as the CapLinked due diligence data room, if businesses hope to move forward with M&A quickly and securely. When you have dozens of individuals sifting through hundreds or even thousands of documents, it’s important to make the process as easy as possible. Not only is it much easier to find a specific file (use the search function instead of sifting through filing cabinets), but it’s also the most secure approach to keep the data confidential.

Interesting Related Article: “5 Tips For Ensuring a Smooth M&A”