Financial data is playing an increasingly important role in companies and therefore requires special attention in M&A transactions. That is why most companies choose reliable digital data storage like Virtual Data Room.
The purpose of using the M&A Data Room
Mergers and acquisitions (M&A) is generally understood as one of the additional ways to consolidate the business, expand the company’s activities and areas of influence in a particular market. Due Diligence is an integral part of the merger and acquisition process, as it generates a large array of reliable financial information about the company’s activities, which allows you to objectively determine the value of the company.
Properly planned and performed due diligence can help the parties to achieve mutual understanding of key business processes, for example, the process of value creation, including products and services; market position and brand; sales and distribution; buyers; production or provision of services, and so on.
Of course, this evaluation requires the preparation and distribution of large arrays of financial data which are at times inconvenient for parties to this transaction, and are not entirely secure. Besides, the buyer often wants to take a very close look at what the company’s workforce and customer base are like as they are often the primary (or only) assets of the takeover candidate. For these reasons, M&A Data Room was created. It is an online service for storing, fishing, and completing transactions. Data Room is a digital platform that allows a special group of people to inspect the documents to be checked under strict security requirements. The functions, such as download and print options, are usually deactivated so that the other side can only check, but cannot obtain or create copies. In addition, the buyer’s or bidder’s consultants are only allowed to provide the information obtained in a very aggregated form. With the so-called “black box structure”, which is the strictest version, only external consultants of the buyer or bidder have access to the Data Room.
Digital Data Room software advantages
To understand why deal-makers mostly use Data Room solutions for sharing financial data we need to analyze the common software benefits:
Factors such as team members across different time zones and countries, the integration of disparate applications, and system administration resources needed to support distributed teams, solutions, and infrastructure undermine the effectiveness of collaboration technologies. But Data Room was designed to solve these problems.
Deal management pipelines or charts are a part of the analytics tools that modern automation programs have. Due to them, management can receive up-to-date data on sales, project progress, and other important indicators, which will help make more effective management decisions.
Cloud-based Data Room software can be easily accessed anywhere, anytime, enabling companies to scale up, as employees can easily access data wherever the Internet is.
Experienced accountants are well aware of the importance of periodically copying the database and maintaining an archive. Failure of technology, the urgent need to transfer all information to another computer require reinstallation of the accounting program. And virtual technology completely solves the problem.
- Low cost
The responsibility for the system administration, modernization, and maintenance of the enterprise lies with the cloud service provider, and any changes are made without suspending the enterprise. In addition, the cost of software workers is disappearing, and the total cost of cloud computing services for a small firm is usually 50% less than the software installed on the firm’s premises in the previous four years.