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Calm in the Chaos: The Case for Virtual Data Rooms (VDRs) in M&A

Philip Whitchelo, Vice President, Strategy and Product Marketing, Intralinks | Sept. 5, 2016
An insight on how M&A teams balance the requirement to close quickly with the need to ensure that the buy-side have enough time to conduct thorough due diligence on the assets they are acquiring.

Improved security, compliance and transparency: By hosting documents in a cloud-based, on-demand service, information rights management (IRM) can be assigned by the seller, giving them total control of their most confidential documents throughout the deal - from creation and distribution to decommissioning. 

Security is embedded in each file and travels with the documents regardless of the file type or format; each file can be shared easily without plugins required. The seller can revoke access to the documents with a click of a button even after a file has been downloaded.

Since VDRs allow sellers to keep track of all the activities happening during the due diligence process, the number of potential mistakes can be mitigated, compared to when information is being shared on multiple platforms or in a physical data room. The ability to record and store all actions and documents also means that during the due diligence the seller can gain an insight into each buyer's activity.

Speaking the same language: VDRs are also equipped with language translation features, which can be particularly useful when conducting cross-border transactions. Translation has traditionally been a tedious activity prolonging the deal making process. However, by incorporating technology automating the translation process, deals can be sped up to a matter of days. Teams conducting due diligence with a physical data room may not find the same services at their disposal - especially one that is so cost-effective. 

VDRs: More than a file sharing and storage system

While many might still have the perception VDRs are merely online file sharing and storage systems, this is far from reality. A strategic transaction requires collaboration on high-risk data that only VDRs are equipped to provide with security features where, they ensure that even in the event of a cyber-attack, the seller will retain complete control of all confidential information. Additionally, using VDRs during the due diligence process allows investment teams to typically speed up the deal making process by at least a month, while simultaneously remaining compliant and cost effective.

The VDR has come a long way since it was developed twenty years ago, and looking to the future it will continue to advance.

 

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