The use of virtual data rooms has dramatically changed the way transactions are executed. There was a time time was when you had to travel to access a physical data rooms, check piles of papaer documents and meet with other parties involved in the due diligence process. Depending on the location of the participants, this could mean air or train travel, driving long distances or taking public transport. A venue had to be found, binders had to be prepared with all the documentation and often, admin staff were necessary to record the minutes of the meeting. In the case of long meetings, food and drink also had to be supplied. All this required time, effort and money, and all you needed was for one party to be delayed or unable to attend and to throw the whole process out of sync and delay the overall transaction.
1) Terminating Travel
Virtual data rooms have completely eradicated the need for travel by providing remote access to the documentation, little time is needed to prepare due diligence ahead of meetings. Everything is available online immediately. It’s no longer necessary to print and collate large, unwieldy binders full of material and pay to courier them to the parties before the meeting to allow them time to prepare. Each participant can log in at his or her leisure and review the information. Virtual board rooms and other online meeting facilities mean that you incur no venue or catering costs, and travel is unnecessary to access the data rooms online.
2) Simplifying Security
Confidentiality is typically a major focus during mergers and acquisitions. Before the days of data rooms, the preparation and circulation of due diligence materials ahead of time created the potential for information to be leaked. Admin workers without the necessary clearance were often involved in copying and binding documents, and the sheer existence of reports and data meant a heightened risk of information being left lying on desks, mislaid in departments and stolen from vehicles.
With virtual data rooms, the risk is minimized by secure encryption and access control that ensure only authorized staff can download, print or copy an item. In addition, the controlled environment allows all parties to access the information without the risk of losing confidentiality.
3) Tracking Activities
A comprehensive audit trail is necessary for tracking the use of sensitive documentation. One of the ways in which virtual data rooms simplify the due diligence process is the tracking of activities. Setting permissions for each document that give users specific authority for each file makes it possible to see who opens, views or copies the material, with the date and time of the viewing. Reporting functions enable a full viewing history to be drawn and printed out, so if for some reason the security of the deal is compromised, administrators can see where - and when – the problem occurred.
4) Facilitating Communication
Communication is at the heart of a major deal such as a merger or acquisition. Civilizations have risen and fallen on the success and quality of communications, and so have companies. Data rooms are able to automate most standard messages, such as when documents are added to the room. Users can set alerts for when materials are viewed, printed or altered, and online communications are enhanced by having users send each other links to specific documents. Daily and weekly emails provide summaries of the additions to the site.
The use of virtual data rooms makes the preparation of due diligence for any type of deal simpler than it was in the past. With the ongoing improvements in technology, we can expect to see new and enhanced features appearing regularly.