Many businesses need data rooms and secure file sharing platforms. With the growing need to increase efficiency, business owners are seeking a better understanding of the major differences between traditional data rooms and virtual data rooms. While many choose to stick with the traditional way of doing things, many more are discovering that for M&A transactions virtual data rooms have so many advantages, that it would be foolish not to switch.
Virtual Data Rooms save time, increase deal value and reduce costs when compared to their physical counterpart. One of the best things about a virtual data room is that it gives you the opportunity to reach a vast number of bidders in a small amount of time. In a traditional data room, bidders would have to schedule an appointment for access to the room. However, in a virtual data room, those same bidders would all have access to the room simultaneously, shortening the deal time significantly and resulting in 20 to 30 percent higher bid values.
Many bidders simply do not have time to travel to and from traditional data rooms. Implementing a virtual data room can turn these would-be bidders into buyers, as they can access the data room 24 hours a day, seven days a week from anywhere in the world.
You can control the process with ease in a virtual data room. Controlling a physical data room is not straight forward. Often, traditional data rooms are kept at a lawyer's office to increase security. While this method does increase security, it also increases the cost of maintaining your data room. With an online data room, you can have all of your data stored on a secure server at a third party data centre. With good software in place, you can easily control who has access to individual documents. You also have the option to control who copies documents in your data room, something that is almost impossible in a traditional data room.
Everything has an audit trail on a virtual data room but it’s difficult to do in a physical data room. Setting up an online data room is a process that is quick and simple. Often, you can have your data room up and running in a matter of hours, and thousands of pages of documents can be made available on your site within a couple of days or less. In a traditional data room, you won't be able to keep track of who has viewed which document, but an online data room enables you to keep daily reports of which bidders looked at which documents. Your online data room will also provide you with an electronic record of exactly who viewed which document, and when they viewed it.
Keeping communication confidential and organised is easy in a virtual data room. Physical data rooms don't have the privilege of technology to streamline this process. Another advantage that an online data room has over a traditional data room is that communications between you and your bidders can be confidential and detailed. Online data rooms allow you to answer specific questions from one company without allowing others to see that information. Conversely, if you want to add new documentation for everyone to see, the process is made simple and easy to upload additional documents.
5) Deal Intelligence
Interest in your company can be analysed in a virtual data room but a physical data room has no such reporting tools. Your investment banker will be able to leverage that information to increase value during the bidding process. Understanding what bidders are interested in is a vital component of being able to increase the final offer to your company.
Virtual data rooms not only increase the efficiency over the paper process, they also provide invaluable information for your investment banker to use in order to drive the price up.
By reducing costs, increasing exposure to potential bidders/investors and decreasing time to market, a Virtual Data Room can reduce costs while increasing deal value for clients.