Virtual data rooms (VDR) are now common in most M&A transactions. In the last five years the adoption of datarooms in all types of transactions has surprised even the most optimistic industry experts and there are now very few datarooms carried out in paper. This adoption has been global, even in more traditional paper based markets such as China, India and Latin America.
Six areas of the M&A process that are optimized with a virtual data room are:
Being prepared for a transaction is vital for the sell side company. One of the main areas for this is having all the documentation (such as business plans, financials, board materials, main contracts) in an organized manner so that if there is sell side opportunity, the process does not have to be stalled with the documentation. With a VDR, you can design a unified and straightforward structure for documentation purposes. This enables the involved parties such as lawyers and bankers to populate in the dataroom with the necessary documents ahead of the transaction.
Traditionally, the marketing stage was done posting a document or emailing a PDF pitch to a number of contacts. This process is normally very manual, slow and open to mistakes. Using a Virtual data room assures you of complete privacy. It also helps you to distribute the marketing document to many people, have visibility about who has looked at a documents and who is interested in the transaction and keep documentation secured.
The negotiation and due diligence stages are becoming more interrelated. A Virtual data room allows you to track the interest of each party in the different parts of the transaction by tracking the activity level of each bidder in each document. A good Q&A module (Question and Answer) also provides an exceptional tool to communicate with bidders giving them answers in the safest and fastest manner and preparing for negotiation sessions.
This is the obvious stage where data rooms play a key role. In this stage a dataroom allows you to provide the relevant information securely to the different parties (accountants, consultants, lawyers) in a secure layered way.
Any business due diligence will include due diligence of all business areas.
The increased use of technology to assist with due diligence communication corresponds to the greater focus on the area of IT due diligence generally. Many of the materials important in the due diligence process for a software or technology investment are particularly suited to the use of a virtual data room. Read more about IT due diligence at http://www.ITDueDilignenceGuide.com
A dataroom can help speeding up closing. Drafts of final documentation can be shared and commented using simple and effective version control functionality. Upon signing all disclosure lists can also be produced by the audit function of the dataroom.
Post closing/Deal Bible
A good virtual data room will offer the possibility to archive a transaction. This archive serves as a deal bible in case the due diligence information and disclosures need to be referred to in the future. Parties are normally interested in this service as it provides a secure, always accessible, storage for the information that is maintained by an independent third party.