Polestar acquired Guggenheim Partners for $20 billion; Nvidia bought Arm Holding for $40 billion, while Microsoft acquired Activision Blizzard for a whopping $68.7 billion. These were some of the biggest M&A transactions in the last few years.
It is easily understandable that these transactions involved a lot of paperwork, exchange, and evaluation of corporate records, legal obligations, protection of sensitive company material, due diligence, and whatnot.
Sellers in M&A deals are not only concerned about the completion of the transaction. They need to protect their confidential business data during the process. For that, they need reliable and safe business solutions, such as virtual data rooms, to protect their important data from external and internal threats.
Why is online data room software so crucial for M&A deals? How does it protect your corporate data? Read on to get the answers!
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What is an enterprise virtual data room?
An enterprise virtual data room is an online data storage space and a virtual platform specifically designed to safely store and exchange important corporate data and facilitate enterprises and large organizations during business deals.
An enterprise-scale electronic data room has all the basic features of a VDR and additional project management features that help in complex business transactions such as M&As, fundraising, IPOs, partnerships, etc. Depending on corporate needs, a virtual data room can accommodate hundreds of users simultaneously.
Importance of data room software in M&A deals
Why are VDRs important for M&A deals? How do they keep data safe? Here are your answers.
1. Centralized and secure data storage
Mergers and acquisitions are highly complex business transactions involving massive amounts of data exchange, communication, and collaboration. A lot of M&A deals fail because of insufficient or delayed supply of necessary corporate documents.
Traditionally, project management teams had to visit the seller company for document verification and evaluation. This process was not only tiring but time-consuming as well. Also, the departments in the company maintain their own records, so the data is found in dispersed form.
Imagine the acquiring company visiting the HR, Sales, or Finance department to collect all the necessary documents; this is synonymous with inefficiency.
In comparison to that, an online data room can help businesses keep all their corporate documents in one place. This will allow the project management teams to access any document they need from a single platform. Moreover, the data will be easily accessible to your own management and workforce.
The best thing about data room software is its unbreakable security. The data room administration can restrict unauthorized access to the data room with the help of two-factor authentication.
Data room management can also add or remove any user or purge any device that is connected to the data room. That means, if a user loses their device, it can be purged from the data room.
2. Safe data sharing
Online data room software makes data sharing a piece of cake. A user can share a file with multiple users simultaneously. Moreover, the drag-n-drop feature allows you to upload multiple files simultaneously.
But is data sharing in virtual data rooms safe? Yes, an electronic data room helps you protect data from internal threats as well. For example, if you worry that your document may fall into the hands of an unintended user, you can encrypt the document, and then only the intended recipient will be able to decode it.
Apart from that, depending on the data room services you go for, you can use the View only feature on any document. That means other users won’t be able to download, edit, or print that document.
View only feature is extremely useful when a company wants to protect its highly confidential documents such as patents, secret formulas, product designs, prototypes, etc.
Modern virtual data room providers offer smart lock features which allow you to revoke access to any document even after the end-user downloads it. The smart lock feature helps avoid data loss even if you sent a file by mistake.
Lastly, the digital watermarking feature in virtual data rooms is highly effective in settling copyright disputes. It allows you to trace the origin of any document or file.
3. Seamless collaboration
Seamless collaboration is one of the biggest advantages of using virtual data rooms for M&A deals. Sellers, buyers, legal advisors, investors, stakeholders, and third parties can collaborate on one central platform.
Communication is the key to successful M&A deals, and data rooms ensure 24/7 communication between all concerned parties.
Users can arrange audio or video meetings, communicate privately, engage in group discussions, and work on shared documents. Depending on their access, they can leave notes, access or edit any document, and that too from anywhere in the world.
Data room comparison is mandatory
It is important to note that all virtual data room providers are not the same. Some data rooms may provide excellent security features but they may not have all the collaboration tools you need. Therefore, you should compare virtual data rooms and decide which one suits your requirements.
Final words
Protecting your highly sensitive data during M&A deals has been made easy by virtual data rooms. VDRs not only protect your data but they ensure seamless communication, data sharing, and collaboration, ultimately boosting the deal speed. The best part? You can add multiple users simultaneously, enjoying a completely secure, centralized, and convenient collaboration on the deal.
