Most business security and IT security experts agree that data room services (https://dataroomproviders.ca/due-diligence/) are currently the most secure means of doing business.
All the key information needed to complete a transaction should reside in an online repository. Today, virtual data rooms perform this function perfectly, which not only allows parties to the transaction to have remote access to documents at any time but also provides a high level of security.
Virtual data room software helps companies securely share important financial and legal documents, as well as confidential client information. This type of software is used by law firms, accounting firms, commercial real estate dealers, and any company that wants to provide data room for due diligence.
Let’s learn about data rooms and their benefits for Corporate and Business Deal Making.
The Benefits of Data Room for Corporate and Business Deal Making
All information gathered in one place allows a buyer to complete due diligence more quickly, whereas reviewing “live” documents can take months.
Enhanced Tracking and Reporting
You can more easily track document changes and user actions to ensure a consistent audit trail. Automated reports and data exports can be easily made to gain insight into virtual data room activity.
Simplified Due Diligence
Before doing business with a particular company, you need to know about its financial situation and any potential liabilities or opportunities. Electronic data rooms simplify the sharing of sensitive documents with versioning, checklists, bulk uploads, and other features to ensure that due diligence is conducted quickly and efficiently.
Virtual data room software provides powerful security features such as strong encryption, multi-factor authentication, and single sign-on integration (SSO). Common documents can be protected with watermarks, printing restrictions, and the expiration of access. Most products ensure compliance with common security standards such as HIPAA, GDPR, PCI DSS, and SOC 2.
Another indisputable advantage of a virtual data room is the ability to analyze weaknesses in advance and eliminate mistakes or shortcomings. For example, to make sure that the necessary information is provided in full: all contracts are signed by both parties, all changes in documents are documented, protocols and decisions of meetings of shareholders and directors are properly executed, etc. Often investors are extremely attentive to such details, and deficiencies in the documents may delay the deal or cause a price reduction.
In addition, a careful analysis of the behavior of the buyer or his representatives in the online data room will help to understand what documents he is most interested in, and with a high probability predict what arguments he will use in negotiations, wanting to get a discount.
Virtual Data Room vs. Dropbox and others
Keep in mind that there is a common misconception about services such as Dropbox or Google Docs. While such applications are convenient for file sharing, they may not provide the same level of data security as VDRs. Moreover, their features are limited and do not include the services needed for conversations, audits, and so on.
The actual features, of course, vary depending on which virtual data room provider you choose and what plan you pay for. But here are some of the features you might need:
- Data encryption
- Audit trail and activity tracking
- Digital rights management
- Access control
- Online document viewer (in a browser)
- Bulk download, drag and drop
- As much file storage space as you need
- Usage features suitable for individual use
- Protection against external threats
Traditional VDR Providers for Deals
These virtual data rooms were invented specifically for M&A deals with large enterprises. The M&A process involves due diligence when exchanging large portions of sensitive information, and in the past, it was quite a time-consuming operation. Thus, the first VDR vendors were used to exchange data securely and quickly.
Thus, traditional electronic premises software vendors such as Intralinks and Data site will offer you truly tremendous capabilities at a fairly high price point. Their real drawback may be their excessive complexity. You might just not need most of their features!
Modern VDR Providers for Deals
You can call a provider “modern” when it’s been on the market for the last decade. Popular services here are OneHub, SecureDocs, and Ansarada. They are a great example of how VDRs have improved technically over time.
Their main advantage is the cheaper price. But that does not mean that today’s VDRs are inferior to their predecessors. On the contrary, the key features of a modern data room are high-security standards and more than enough convenience. In addition, these VDRs are distinguished by special features that may be necessary for a particular purpose. Thus, you can choose exactly the VDR you need, without unnecessary features and at a more affordable price.
Cost of Data Room Software
The price for a virtual data room, and can be divided into three price tiers based on the initial price per room per month:
- $45 – $150
- $150 – $260
Most developers base pricing on the space used and the amount of time the VDR is open. Some M&A law firms can afford to provide their own VDRs. If you need a VDR one time, however, you can use services that will provide storage based on the amount of time. If the plan is to use VDRs regularly for a large number of transactions per year, then purchasing a subscription is ideal.
Complex business transactions (such as mergers and acquisitions) often take place in different time zones. If a transaction is stalled because someone can’t access a document, you need immediate support. In that case, it’s important to hijack in advance whether support is available 24/7/365. Next, you can negotiate the level of service.
Of course, the buyer can try to close the deal on their own, but the number of pitfalls is so great that the chances of profitable and high quality are extremely small. We recommend that you don’t let it go to waste and conduct the transaction using a virtual data room. This way, expectations will be met, and the deal will be profitable and safe.