Best Practices for Your Data Room in M&A

Using digital data in mergers and acquisitions is a new business reality. Automating joint work on deal contracts, their approval, and control is often one of the most urgent tasks in implementing modern data room technologies. More information

The data room in the M&A process

Business processes require exchanging data with suppliers, customers, and external partners. The exchange of information is part of processes for service provision, preparation of business transactions, or sensitive projects. Mergers and acquisitions (M&A) are not an exception. It is a complex transaction where highly confidential business data should be exchanged. Therefore, companies create a virtual data room to create a dedicated workspace.

The seller and the buyer must carefully prepare for the M&A transaction so that the accession of a new company leads not only to business expansion but also to an increase in profits. In this case, due diligence plays an important role. This procedure helps to evaluate the target company’s real state and determine the deal’s risks. Here large arrays of documents and sensitive information are analyzed. Thus, data room software ensures access to data stored in a repository. The data room system provides all the necessary tools for managing M&A contracts at each stage of work, from exchanging preliminary information with counterparties to monitoring the timing of fulfilling obligations under the contract.

Best practices

The data room is a protected online storage location that, in addition to data storage, offers many additional functions that are necessary for the context of due diligence: 

    • Assignment of rights: Definition of which buyer group may see, print, or download which documents. 
    • Data management function: To companies whose documents have been made available to interested parties and which have also been viewed, the data room offers the option of activity reports. In subsequent legal disputes, the seller can prove which documents were available and whether they were viewed. 
    • Q&A (question-and-answer) process: During the due diligence, interested parties have the opportunity for the first time to put questions directly to those responsible for the transaction object. A few selected employees are typically taken into their confidence, not least because the responsible employees can only clarify some technical questions to avoid overload management. The M&A advisor coordinates the questions between the interested parties and the respective contact persons of the selling party.

What are the advantages of an M&A data room?

The solution allows you to automate any business process of contract management, considering existing business requirements. The online data rooms may ensure many advantages for companies arranging M&A deals. They include:

      • less paper by digitizing incoming documents;
      • reduce printing costs with digital correspondence;
      • data security through secure storage;
      • individual capture and indexing of documents;
      • digital archiving in an audit-proof manner;
      • data protection through individual access authorizations;
      • documents can be found thanks quickly to full-text search;
      • improved information flow within the company through central storage;
      • acceleration of work processes through main, cross-site access;
      • simplified collaboration, even remotely, thanks to access from anywhere;
      • cost savings through space-saving digital archiving on-premises or in the cloud.

So, some providers of virtual data rooms offer the opportunity to create a free test data room directly on their website to familiarize yourself with the operation and functionality and test the use in practice.