Nowadays buyers need detailed information for increasingly in-depth due diligence to mitigate the risks associated with acquisitions. So, in this article, we will explore the role of VDR providers during the M&A deals.
Key points of the M&A process
M&A techniques (mergers and acquisitions) are often used to structure companies. These are operations of economic and legal nature, designed to unite several organizations into a single corporate structure. The owners of the new commercial unit are persons who have a controlling stake. The purpose of the event is to increase capital efficiency.
Preparation directly for the agreement takes place in three stages.
- The sphere of activity of the enterprise is studied: growth dynamics, possible distribution of potential, the influence of external factors are estimated. First of all, real assets and liabilities are considered.
- Own possibilities are analyzed. In any case, the company must make an unbiased self-assessment. Using the data obtained, you can understand what criteria should be followed when choosing an organization.
- Possible competitors are being investigated. You can feel all the positive moments of unification if you carefully study the potential of rivals. After evaluating them, it is easier to determine.
What is an M&A Virtual Data Room?
During M&A deals lawyers should be involved in the formation of the data room providers. All important information required to conclude a transaction must be in the online storage. A Virtual Data Room is a repository of information that is used to store and exchange documents. This system is also used to facilitate the due diligence process during a merger and acquisition transaction.
As a rule, most M&A transactions are preceded by legal, financial, and other due diligence, which is carried out by the buyer. The task of the legal service is the systematization of corporate, economic, financial documents. Are they located in one place, who has access to them, in what order is this information provided to the buyer? Due to the amount of information and documents that need to be provided to the buyer, the organization of such a Data Room will require time, which directly affects the timing of the transaction. Each document in the EVA is encrypted. To view or print such a document, you must have a data room user account and have the required access rights.
Why are they used?
There are the following reasons to use VDR during M&A:
- the ability to analyze weaknesses in advance and eliminate errors or shortcomings;
- secure storing of documents;
- collaboration from different locations;
- simplification of the working process;
- audit and reporting;
- technical support from developers by phone or e-mail.