Virtual Data Rooms for Mergers and Acquisitions

M&A deals can be overwhelming for all parties involved. These deals involve many repetitive and tedious tasks like document requests and reviews, which prolongs the process and makes it inefficient. 

However, there is a great solution — the M&A data room. It’s designed with complex transactions in mind, so it allows users to work effectively throughout the whole deal lifecycle.

What is an M&A data room?

A virtual data room is a secure cloud repository, which is used for storing and sharing confidential information between different parties that are involved in complex corporate transactions. VDRs ensure a properly secure environment for M&A transactions that can not be achieved via conventional cloud storage. Moreover, the best data rooms for M&A provide everyone involved in the deal with all needed functionality to enable smooth collaboration and streamline workflows.

Virtual data rooms for mergers and acquisitions are very useful when examining critical corporate data during M&A transactions. However, it’s worth noting that using a virtual data room for due diligence is only efficient when all files have a consistent and clear M&A data room structure.

Which begs the question, “How can you organize important documents and folders in your M&A data room to make the deal process easier for all parties involved?”

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Step-by-step preparation of a virtual data room for M&A

Here is a step-by-step guide for better setup and organization of  virtual data rooms for mergers and acquisitions: 

1. Gather and structure documents 

It’s important to identify all the necessary documents and analyze how to organize them by categories and topics, and designate restricted folders. It’s worth creating a plan for your virtual data room. Consider the following questions:

  • What documents will be required during the due diligence process?
  • How much storage will you need to have all documents in the VDR?
  • How many users are expected to work within the data room?

You need to break down the process into smaller, more manageable tasks and create a checklist. It will make uploading files to the data room much easier, and there will be less chance of forgetting something important during folder organization. 

2. Assign administrators 

Here you need to focus on the responsibility of the administrators. It usually includes assigning user permissions, creating and managing folders, inviting users, and maintaining the VDR. There should be a balance when providing access to the virtual data room, as inviting more users leads to more transparency and advanced communication.

It’s recommended to assign at least two administrators to monitor all activity within the M&A data room. It will also help to speed up the preparation process of the M&A data room.

3. Upload all documents 

You need to upload all relevant files, which are going to be used during the deal lifecycle. It’s also important to keep all documents updated regularly. Outdated documents are not valuable during the M&A process — some financial documents may be the only exception. Also, you should regularly check whether documents in the data room are still relevant and useful to avoid wasting storage capacity. Storage space can get expensive, so make sure you use it efficiently.

Don’t forget to remove unnecessary files from your folders, such as thumbnail caches and temporary office files. There are also several common ways to upload documents to the data room, including:

  • Direct uploads. The admins manually upload all files to the data room.
  • Syncing local folders. The user that uploads files can organize the folder structure from a local storage device and then sync the content with the virtual data room.
  • Delegating uploads. All files uploaded to the data room go into a preparation folder where an administrator can review and approve them.

4. Invite other authorized users 

When it comes to inviting other users to your M&A data room, security is the top concern throughout the deal process. VDRs provide a wide variety of security features, such as two-step authentication, advanced encryption, digital watermarking, user permissions, and activity tracking. 

When you invite new users to your virtual data room, consider the following questions:

  • Which documents should I restrict?
  • Which users should have the authorization to edit files?
  • Is it possible to track user activity within the virtual data room?
  • Do I need an NDA for new users?

After answering these questions, you can decide what to share with potential buyers and other parties involved. Keep in mind that having too many people involved in a deal increases the chances of a data breach. You should only give the right people access to your VDR, and administrators should continually track the room’s user activity to help avoid leaks. 

5. Continue maintaining the data room 

Now that you have everything set up, remember to keep up with your data room’s maintenance. Always keep documents up-to-date, manage comments and questions in the Q&A section, and manage user permissions and groups. The admins should also review user activity to better understand which files are the most interesting to the potential buyers or investors.

Documents to include in an M&A data room 

The most common documents needed for M&A transactions include: 

  1. Legal documents (company and legal structure, trade register excerpts, overview of IP and trademarks, by-laws)
  2. Intellectual property  (licenses, approvals, permits, and certificates)
  3. Agreements (shareholders’ agreement, list of all lease agreements)
  4. List of current shareholders, officers, and directors
  5. Customers (standard customer contracts, list of the company’s 20 largest customers or channels)
  6. Supplier documents (top three supplier agreements)
  7. HR documents (standard working contracts, CVs of key personnel, employee details, contracts of key employees)
  8. Finances and taxes (tax accounts, financing agreements, audited financial statements)
  9. List of insurance policies
  10. Current management reporting and business plan

How VDRs benefit the M&A process

Best data rooms for M&A can bring much value to companies involved in complex transactions. Here are the most important advantages of using a data room for mergers and acquisitions: 

  • Security. Best data rooms for M&A deals provide top security features, including activity and document tracking, encryption, and watermarking. Using these features will result in a minimized risk of a data breach during complex transactions.
  • Easy collaboration. Virtual data rooms for mergers and acquisitions can be accessed from any place at any time, as all files are stored in the cloud. Therefore, users can benefit from integrated communication and collaboration tools. An M&A data room helps to keep everything organized and easily manageable.
  • Time and cost savings. Using a VDR eliminates the need to travel for document review. Also, there’s no need to rent a physical data room, as everything is stored in the cloud and can be accessed through an internet connection. 
  • User activity tracking. As a VDR user, you get a dashboard that allows you to see each document’s user activity within the data room. The administrators have full control over all documents.

A virtual data room serves as an advanced solution for effective work that brings a lot of value to the whole M&A process. Visit our main page to choose the best data rooms for M&A among the top providers available on the market.