Theoretically, the due diligence process in mergers and acquisitions should take less than 60 days as it boosts the chances of successfully completing a deal. Just about a decade ago, this process used to take months, and buyers would often back down from completing the deals. However, thanks to online dataroom software, things have changed now; due diligence is much faster and easier.
Online data room software has not only streamlined the M&A transactions but has also simplified many other complex business deals, including capital or fundraising, initial public offerings, portfolio management, real estate transactions, and joint ventures.
Read on to learn what is a virtual data room and how it automates large-scale transactions in the corporate sector.
What is Dataroom Software?
A virtual data room is an online document storage repository for professionals, businesses, and government organizations to store, share, and automate the data flow within and outside the organization.
Online data room software comes with the latest tools for safe and controlled communication. Rather than communicating through emails or other insecure routes, virtual data rooms help users communicate via VDR messenger, group chats, public posts, audio/video calls, and Q&A modules (during business transactions).
Deal management tools are the latest technology in data room software. Virtual data room providers now provide AI-based advanced analytics tools that can be used to assess which types of documents are mostly viewed by the users. It helps businesses during business deals as they can determine what buyers are looking for. Other latest VDR features include task prioritization, built-in notifications, built-in Excel Viewer, and smart search.
Top 5 Global Use Cases Of Virtual Data Room Software
1. Mergers and Acquisitions
Corporations, enterprises, and other large-sized business entities started using data room software for M&As over a decade ago. The core objective of introducing VDRs in M&A transactions was to simplify and shorten the due diligence process.
Virtual data rooms are equally useful for buyers and sellers involved in M&As. That said, buyers can get access to centralized data storage of the target company, and on top of that, they can access it remotely, which allows the project teams to conduct due diligence at their own pace and ease.
Sellers, on the other hand, have more control over their important or secretive business documents. They can decide how much access should be given to the buyers and which documents must be protected from unauthorized use. Most importantly, sellers can create multiple data rooms for different buyers and get the best possible quote.
Best data rooms for M&As: DealRoom, Merrill Datasite, iDeals, and Firmex.
Companies usually hire fundraisers to raise capital on their behalf. Fundraisers use virtual data rooms as their primary mode of collaboration with potential investors, clients, and financial or legal advisors.
Using online dataroom software, fundraisers can provide potential investors 24/7 access to corporate documents, answer their queries via Q&A modules, give presentations, and arrange meetings with concerned parties. The best part is the management can monitor all activities in the data room.
3. Legal Document Management
The legal industry stands amongst the biggest consumers of virtual data rooms. Lawyers/legal advisors have access to their client’s highly confidential information and are legally bound to protect data integrity.
Therefore, law firms turn to online data rooms as their primary data storage units. Virtual data rooms possess the most advanced security features available in the digital world, which help lawyers keep that data safe.
Other than that, law firms keep communications with their clients or interested parties safe via virtual data rooms. Vendors like iDeals provide lawyers with a massive legal forms library and bankruptcy case management tools.
4. Initial Public Offering (IPO)
A company going public is legally bound to make required business documents available to the public. That’s because shareholders and investors need to analyze the company’s previous performance, current status, and future projections.
Presenting confidential data to a large number of individuals is full of risks; competitors can misuse publically available data.
Virtual data rooms make IPOs much safer for companies. They can ask the investors to sign NDAs or restrict data room users from copying or downloading unauthorized documents. Any data room user trying to misuse or steal a document can be immediately identified and sued in court.
5. Real Estate
Real estate firms also use data room software as their main data storage facilities to manage their portfolios, legal documents, prototypes, clients’ details, and other sensitive materials.
Apart from that, data rooms are used for online communication and data sharing during real estate transactions. Real estate firms use built-in HD video calling tools for online visual tours of the concerned properties. Documents can be signed electronically (electronic signature feature) within the data room.
Summing it up
The modern-day use of virtual data room software is not limited to mere data storage. Data room services are now used for project management, online collaboration, board communications, and transactions like IPOs, fundraising, M&As, strategic partnerships, etc.