The last few weeks have been very intense in the Virtual Data Room industry worldwide with in increasing number of transactions (finally).    There has been a significant change in the make up of the data room users with private equity becoming much more important in the buy side.

Bloomberg has covered this in two recent articles from two different approaches.  The first one argues that the increasing appetite of many funds is driven by the "deploy or return" situation that many funds are in.  The second one (Pass the Parcel...) claims that the significant amount of rollover deals benefits funds but not so much LPs.

Virtual data rooms (VDRs) have become the norm in the due diligence stage in most M&A transactions, substituting the traditional paper-based data rooms (see Know-how article “Virtual data rooms: the due diligence evolution”). However, in the last two years, the use of VDRs has expanded dramatically: both deeper in the M&A process and beyond M&A transactions. We believe that this shift in the role of Virtual Data Rooms is driven by the positive experiences that advisers and clients have had with the convenience, simplicity and functionality of VDRs and with their satisfaction and trust in the level of service provided by dataroom specialists.

During the next few weeks, we will talk about the the use of VDRs in different areas of the corporate world.  Among others, we will focus on:

• Private Equity/Venture Capital Funds

• Hedge funds

• IPO Transactions

• Restructuring (Bankruptcy)

• Health

• Corporate Repository

We will share our experiences in each area with specific examples.  Please send us comments and thoughts!

Interesting article by Paul Siegenthaler author of the highly recommended book "Perfect M&As" about the 10 main reasons for M&A failure.

Paul highlights poor due diligence as one of the key factors that make M&A transactions fail. I cannot agree more. In the last 20 years I have participated in a number of transactions in which value was destroyed due to poor due diligence.

The main reasons that I see for poor due diligence are:

- Asking the wrong questions.  Focusing on details before deciding what actually drives value for the acquisition.

- Disconnect between the deal team and the due diligence team.  In many transactions, there is a significant gap between the deal team and the team executing the due diligence whereas the deal team just sees the due diligence findings as hurdles.

- No real business due diligence.  Many DD processes turn into a legal/financial/risk audit too early into the process, ignoring the "real" business due diligence.

- Organization of information.  Many data rooms do not take advantage of the great deal tools that most virtual data room provide such as organization of folders, Question and Answer, reporting.

What do you think?