Data rooms have become a fixture of the corporate landscape. So much so that it is, in fact, impossible to imagine M&A transactions happening without one. But what exactly is a virtual data room for M&A, what technology does it leverage, and why do you need one?
Bear with us as we lead you through the why and wherefore of the data room world.
Why use a data room for M&A
As the name indicates, an M&A virtual data room is simply a data room that exists entirely in the virtual world. It’s a safe box, a repository for corporate information — both the high-value and the mundane data your company needs for mergers, acquisitions, and other data-intensive operations.
An M&A data room serves a few essential purposes.
1. Security and confidentiality
A data room aims to give you full control of the information space. You can upload, share, and remove access at will. In a space as volatile as the world wide web, virtual data room M&A capabilities are the only way to retain security without losing out on effectiveness.
2. Better workflow effectiveness
A good M&A data room is more than just a high-security archive. It’s also a centralized platform for optimized workflows and teamwork. It’ll make your team faster and more efficient and allow you to collaborate with potential buyers, conduct due diligence, and close deals in an intuitive environment.
3. Keeping records
With the best M&A data room providers, everything that goes on in the data room is easily registered. Logs, file views, downloads, edits — nothing escapes the eye of the machine. You can then easily generate reports and get a comprehensive view of your data room activity at a glance.
Data room M&A features
Not all data rooms are made equal. A data room for M&A is a very special animal with some very characteristic traits. Above all, it’s made to operate at scale.
Let’s talk security, for starters. A file hosting platform like, say, Google Drive or DropBox is plenty safe enough for your everyday storage and sharing needs. No question there.
But can it scale? Can you use it securely for a mega deal involving several potential buyers, hundreds or thousands of different files, and numberless users requiring access?
The answer is no. For that, you’ll need the whole security toolkit. Features such as encryption, account protection, access control, audit trails, user levels, and dynamic watermarking — among many others — will give you full control of the information space. And for that you’ll need an advanced M&A data room.
Nor is security the whole story. For your M&A data room, you’ll want:
- No restrictions. Unlimited storage and unlimited number of users is the only way to go. You don’t want your deal botched because the system can’t cope.
- Integrations galore. We’re not talking about fancy M&A trends. To keep your transactions in one place and fully controlled, your data room should integrate with your full technology stack — everything from Adobe and Office to Google products, Skype, and Zoom.
- Stellar, agile support. Settle for nothing less than immediate assistance for any issues or questions that come up. Because, you know, not every deal can sit and wait it out for you to sort your technical difficulties.
With all that in mind, do your homework when looking for the best M&A virtual data room. Understand what capabilities you need. List them. And check and double-check to make sure your platform of choice won’t let you down when the chips are down.
How to structure a data room for M&A
Don’t worry if you feel a bit lost setting up your data room for a big transaction. It’s all about organization and forethought. Follow the steps below and you’re good to go.
1. Plan the layout before you upload
That is to say, begin by listing the different sectors and categories for due diligence. For instance: finance, legal, marketing, and so on. Create folders and subfolders accordingly, making sure you have a visually simple and easily navigable structure.
2. Upload your files
Now the folders are set, simply gather and upload your files as needed. Easy-peasy.
3. Assign access levels
Not all content has the same security clearance. Set different confidentiality levels for different folders or files, according to need.
4. Invite users and give permissions
Now is the time to invite your team members, as well as the buying side. You can send out invitations to multiple email addresses at the same time — just don’t forget to assign permission (access) levels appropriately. You may also want to set a few of your colleagues as administrators.
A useful tip here is to first invite yourself, logging in with another email address in order to check and see that your access levels set on step 3 really are working. Promote and demote your other account’s clearance in order to check that your information is well protected.
5. Monitor your information environment and use the audit trail
Audit log and reporting features will help you gauge buyer interest and ensure users are able to use and access information as per your plan.