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Virtual Data Room for Mergers and Acquisitions

Mergers and acquisitions (M&A) is a process where two different organizations become one. In most of the cases, it happens when two about equal size companies understand that there are benefits (sales increase and other) of an M&A. Fortunately or not that process has to be digital. This is one of the fundamental rules of modern life. And the bigger the size of companies involved the more powerful technology has to be involved, especially if it is an instance of an M&A.

Merger and acquisition is a complex process which requires due diligence and high confidentiality. It’s always been complicated to keep secret data away from others eyes and it is no different today. Armies of hackers are working day and night to put their hands on precious materials. And preventing them from doing so is VDRs utmost purpose. The main difficulty of this purpose is to provide access to the necessary documentation with due diligence. To optimize this process, the first virtual data rooms were developed.

Due diligence is involved in every aspect of the merger and acquisition process. M&A is the most wide-spread reason for people to use VDR services. The reason for that would be a huge amount of space required for all the jurisdictional data needed for the audit. Also, all the data gathered is top secret and should be treated accordingly. To provide such treatment and decrease resource usage there is simply no other way rather than hire a VDR. Even though the demand for such a service increase with every day, potential customers don’t have a clear understanding of what online data room is capable of. To eliminate such a gap please go through the list of capabilities:

  • M&A deal value maximization
  • Higher number of prospective bidders
  • Fast data audition
  • High-Security standards provided by modern technologies
  • Impossibility of data copying
  • Overall increase effectiveness
  • Accordance with any type of regulations
  • Modern tracking system
  • Contemporary communication system 
  • Decreased expenses
  • User-friendly interface 
  • Data access regulation
  • Access from any point in the world

Advantages of using VDR in M&A Transactions

These days traditional data rooms are way less popular than virtual ones. Let get a clear understanding of why this is true.

Reduction of Expenses

Any physical room has to be located somewhere. That “somewhere” either a private or rented property. Apart from the expanses on the building, the company has to spend funds on its maintenance (cleaning, security, etc.). All those wages summed up result in a huge number. When operating through virtual data room there is no need in a physical space and there are the only couple of specialists needed. Also, keep in mind expenses on logistics. It is not a problem if a physical data room is located in the downtown area but it becomes a struggle if it is outside a city or even a state. In certain cases, the required amount of space couldn’t be easily obtained in a convenient location. Furthermore, there are instances of deals where international companies are involved. As result expenses rocket high.

Effectiveness 

Operating through a physical data room results in effective time use. Instead of working one has to receive permission for access to the documents, spend time travelling to the location, and then search for the required document. And this is not a full list of ineffective actions required to finish a task. Virtual Data Rooms rid their customers of such undesired activities. No need to spend hours for acquiring access permission, travelling, and searching for the required document. Everything is online and could be performed in a couple of button hits. Being an online service VDR saves time and money which results in effectiveness increase. Also, all of the data is available 24/7 which lets users work at their own pace.

Safety

As it was already mentioned before, VDR’s were developed with the security of sensitive documents in mind. Any users activity inside the room is tracked, stored, and controlled. This eliminates any chances of the data leak. Also, this is enhanced by the fact that only trusted personnel is granted with access to these precious materials. Online Data Room service providers guarantee the safety of all the documentation stored. They provide their clients with total control over the working environment so that customers feel safe and secured, No one can get access to the data except one who was authorized to do so. Also, modern tracking systems enable customers to monitor who, when, and where from has accessed the room and documents stored in it.

Transparency of the usage process 

As it was already mentioned before, every respectful virtual data room provider integrates contemporary tracking system into their product. Due to the availability of such a feature, all the activity performed inside the data room can and is tracked, recorded, saved, and monitored. Every single user has his ID number which provides the ability to identify who and when entered the room and which documents looked up for. This technology provides an ultimate argument in the “VDR vs PDR” dispute. A chance of data being leaked unnoticed is zero percent. Clients always know who is the reason for caused issues.

Convenience 

It can’t be stressed enough how important fast and easy access to important data is. To provide partners with valuable data VDR clients have to have internet connection instead of bulks of folders on them.

Current state of the M&A market in UAE

 Even though the virtual data room industry was born in UAE in 2017 and wasn’t noticed, in 2019 it is healthy, prosperous and growing with geometrical progression. More and more companies recognise all the value VDR provides and it doesn’t seem that the number is going to stop growing any time soon.

Value of domestic M&A transactions in UAE 2014-2021

Virtual data room is an exotic product which means not everyone might need it. Such products are popular in the field of healthcare, corporate finance, materials, etc. Here are some of the numbers:

  • $4.5 billion spent in financial district
  • $3.9 billion spent for industrial and chemical materials
  • $3.2 billion spent in telecommunication sector

 The economy of the United Arab Emirates is mostly affected by the global price per oil barrel. UAE Governments do understand that this is an issue and it should be that way forever. Due to that understanding, UAE is constantly looking for different sources of income and this process results in high demand for mergers and acquisitions in the field unrelated to the oil industry. Instances of such fields could be informational technologies sector, all sorts if a digital business, and more. 

Source: statista.com

In 2018 the UAE government decided to let foreign companies enter their market. This was the first time in the entire history when the United Arab Emirates decided to cooperate with foreign companies inside their market. That decision results in high merger and acquisition activity increase, mostly performed by foreigners.

The Process of Setting up the VDR for M&A transaction

In most of the cases setting up virtual data, the room is very simple, however, it depends on the developers how easily they make it. Some of the developer can make it complicated to navigate through the user interface, can make the process of integration VDR application with others complex, etc. When there are service providers who develop their software with users in mind. Also, these good developers offer their customers an option of customization of their interface, which is a good thing to do.

Tips for Preparing VDR 

  • Compile all documents before VDR development: Usually, an online data room development process could be internal our outsource and in the very best case scenario takes up to two weeks. In case if it is outsourced make sure to prepare all of the documentation before contacting the vendor. 
  • Keep it simple: Stick to the plan, keep in mind what you need VDR for. In case if you have chosen to customize your interface, keep in mind that there is also another party who will be using the same interface too. Try to make it as simple as possible.
  • Make it easy: While trying to make your interface as simple as possible, try to keep in mind the fact that VDR software provides quite a lot of useful features and it would good to implement as many of those as possible. However, don’t get way into it. Activate only those features you need. Avoid constructing another puzzle.

When going through the M&A process it is crucial to have specialists who are involved in the business process and have a clear understanding of how to use VDR software to use the room at its full potential. To avoid additional expenses, here is a list of key steps of an online data room setting process when preparing for a merger and acquisition deal (considering that all documentation has already been gathered):

1.VDR Instruction

As it was already mentioned before, all the parties involved in the deal have to have a clear understanding of how the VDR software has to be used. To achieve the desired level of skill potential users have to attend an educational seminar or call technical support which in certain cases operates 24/7. Even though there are numbers of manuals online, there wouldn’t be enough time to go through them in the “field conditions”.

2. Needs Assessment

Any client has to have his or her needs to be assessed. The assessment consists of the following:

  • Size of unloadable documentation (bytes, pages, etc.)
  • Number of physical documents to be scanned (number of pages)
  • Number of potential data room users
  • Duration of the entire usage process

This step is needed for the service provided to evaluate needs and provide a service package.

3. Contract signing

The contract is a must in any deal related to business and VDR service provider hire is not an exception. The client has to understand what data room provider’s responsibilities are.

4. VDR creation

At this point, the service vendor should “establish” the room by the previous steps.

5. Scanning and uploading

While or after the room is created, all the gathered physical data has to be scanned and uploaded to the cloud. As soon this is done, all the data has to be indexed which is also service provider’s responsibility. Preparing name tags, numbers or any other structural system in advance will save you a lot of time and make the setting process finish faster. Also, it is a great idea to optimize unloadable files, so that they take less digital space.

6. Maintenance and quality control

This one is an ineffable step since questions occur now and then and should be addressed in the proper manner. Users usually have security questions, additional documents should be uploaded, and so, and so forth. While users can deal with most of the questions on their own, it is good to know that there is always someone who can give a hand of help. Choose your provider wisely, due to the high demand in such a software, there are quite a few service providers on the market to choose for. One who is looking for such a service should analyse wisely. Here is a shortlist of top players: iDeals, Citrix, Intralinks, Merrill Corporation, Watchdox, Onehub, Ansarada, Box and others. 

VDR allows to deal with processes and ultimate outcomes by nailing data management throughout the deal lifecycle. Nevertheless of the size of your company and the sphere of activity, VDR software will provide the tools your company needs to accelerate the most strategic transactions.

Virtual Data Room Features for M&A 

Technological progress touches every aspect of human’s life and field of virtual data rooms is not an exception. VDRs achieved lots of new features. Such features include:

Dynamic indexing

This one feature would be important for those instances where additional documents occur along the dealing process. If there is a document which is need of indexation, it is simply should be put in the right folder and it will be indexed automatically.

File Format Flexibility

Decent online data room software supports any document format possible. It could be excel or word, or PDF, PPT, JPEG, GIF, you name it. It doesn’t matter what format your file has. All you need is upload to the cloud and enjoy your service. No need to spend time on file format conversion.

Q&A communication

This one becomes essential in those cases where users don’t have other parties phone number but have questions to be answered. There is a communication channel which works just like any other messenger but integrated into the service software for users convenience. This feature saves time drastically.

Access Restriction

Security is one of the most important issues VDR solves. And access restriction is one of its core features. With the help of this tool, access could be granted to the certain “level” of users and taken away from others. For instance, accountants have to deal with the financial type of documents. To help them focus on the parties of their obligations restrict accountants from documents of type “legal”.

Search Console

All of the search engines have it and most of the VDR providers add it to their software. Instead of scrolling through the numbers of files looking for that exact one, the user has to put in files name and voila here it is. Save time and nerves of the user. Works just like any other search console. Put in keywords, enjoy the results.

 Due to the technological progress, VDR software has obtained a rich variety of features which then transformed that software into strong platforms used for merger and acquisition purposes. Now online data rooms achieved more areas of implementation, it became an entire platform for any sort of deal management. 

Thanks to modern tracking systems project owners can now have a clear understanding of who, when, and where gets access to the top-secret database. Through the same system, access can be granted or restricted to the different levels of users. Also, users can now edit documents online which saves time, however, all those edits will be recorded. The tracking system works 24/7. Apart from the tracking system, there are other features that provide their services 24/7. Security, support center, file indexing are sleepless in their desire to provide the best result possible. And most of these features are robots after all. 

All of the above and combined make the process of merger and acquisition easier and cheaper. Also, integrated communication systems provide an environment where the cooperation of the parties involved becomes more effective. The appearance of virtual data rooms has changed the industry of M&A once and forever. Merger and acquisition process has never been that secured and comfortable. This turn has saved years.