Importance of Virtual Data Rooms for Mergers & Acquisitions

In the past two years, the professional marketplace has experienced a marked increase in mergers and acquisitions, or the consolidation of companies or assets through a financial transaction.

In fact, over $2 trillion was spent in just the first few months of 2018 on mergers and acquisitions (M&A). However, whether an M&A is successful or not depends on a variety of factors.

Why Do M&As Fall Through?

According to Forbes, the biggest cause of most M&A failures is a lack of execution. This includes pre-contract dealings involving negotiations and due diligence, legal proceedings, and integration. 

Failed deals happen because of poor communication, shoddy research, and lack of transparency between parties. But with adequate preparation and the right tools, these obstacles are avoidable.

One growing trend is the use of digital tools to streamline the M&A process. Deloitte’s 2020 Mergers & Acquisitions Trends report reveals that survey respondents felt “the use of digital tools and accelerators” was the #1 solution for speeding up their due diligence processes. 

Respondents believe that digital tools help to provide additional insights, minimized risks and uncertainties through additional analysis, assisted in planning for post-close operations, and increased overall speed to close.

Virtual data rooms are the perfect example of a digital tool that can offer these advantages and more in M&As.

How Virtual Data Rooms Streamline the M&A Process

Most, if not all, tasks that formerly would have taken place in a physical board room or office space can now take place in virtual data rooms, including document sharing, signing, and auditing. Here are five specific benefits virtual data rooms bring to the M&A process.

1. Improved document organization

As discovered through Deloitte’s report, the most highly valued benefit of digital tools by surveyed executives was access to more, and better, information. 

Traditional M&A transactions involve encyclopedia-sized binders of information being exchanged between parties. In a virtual data room, this information is organized and indexed, making it easily accessible and shareable. In addition, virtual data room systems such as Onehub offer a search feature, saving hours of time when looking for a particular keyword or document.

2. Increased user security

Almost equally valued by surveyed executives was the decreased risk and uncertainty offered by digital tools. Virtual data rooms promote confidence with their security features. 

For example, users require special authorization to be able to view, download, print, or share certain documents, depending on what level of access they have been granted, and in some systems, document interaction history can be tracked. As a special feature, companies can even require a user to virtually sign a non-disclosure agreement (NDA) before even viewing a document.

3. Safer document storage

Virtual data rooms reduce or eliminate many points of risk where document security might otherwise be compromised. No locked file cabinets are necessary, with keys to keep track of or codes to remember. No need to make backups of hard copies to store offsite in case of fire or flood. 

In conventional file sharing, a fax or an email might be read by the wrong person. Certified mail can be lost, and documents can be misplaced. These scenarios are much less likely in a virtual data room system.

4. Integration

Executives also value the way digital tools help plan for integration. Virtual data rooms should be compatible with common types of programs used by companies, such as collaborative document composition and video conferencing. This assists in every state of an M&A, from initial discussions to after the merge has taken place.

5. Efficiency

Digital tools tend to increase the speed at which a deal closes. Conventional models require long in-person meetings, certified documents mailed, signed, and returned, and executives traveling to meet with each other. 

Virtual data rooms eliminate most – and in some cases, all – need for these things. And of course, by eliminating the need for in-person meetings, virtual data rooms enable international M&A deals to close with few to no travel expenses.

Onehub and M&As

Onehub offers the features and benefits executives are looking for when it comes to finding the best virtual data room for mergers and acquisitions. 

To see just how simple M&A deals can be with the right virtual data room, schedule a free Onehub trial. After exploring the solutions the platform offers, you’re sure to see how virtual data rooms can create a smooth and seamless transaction while simultaneously improving security for any M&A.