M&A Deals: How Data Rooms Can Help

What is an M&A?

The abbreviation M&A stands for mergers and acquisitions. These two terms are often used interchangeably, but they have two different use cases. Mergers happen when two companies are treated as equals, and acquisitions occur when one company incorporates another company into its current structure. 

M&A deals consist of one of those two instances and happen often in the business world. It is a difficult process that occurs over a certain period of time and typically involves a lot of paperwork, depending on the complexity of the companies.

Features of M&A deals in the UK

M&A deals are rising in the UK as executives continue to seek alternative methods of growth. Over 50% of executives declared that they will pursue an M&A deal in the next 12 months. Cross-border M&A deals will also be more prevalent as 65% of the respondents confirmed their interest in this sort of action.

The UK deal market is an especially important place, hence Brexit combined with the pandemic forced executives to make some adjustments to their supply chains. The potential of M&As, as stated in this article, is on the rise.

What is an M&A data room?

data room for Mergers and Acquisitions

M&A involves going through a copious amount of documents and combining a lot of data from both of the companies. Due diligence in M&A deals was usually carried out in physical data rooms, but with the current situation worldwide forcing business operations to be concluded remotely, virtual data rooms have been more commonly used.

Using a physical data room for M&A

Here are a few tips that will help you maximize the use of physical data room for M&A:

  • Arrange accessible spaces in which it is possible for the interested party to sit down and look through the document.
  • Make sure the room is accessible at a reasonable time.
  • Ensure the integrity of the documents by allowing one expert and their team to access the files at one time.
  • Make sure the organization of presented files is clear and well-structured.

Due to those physical limitations clearly visible in the examples shown above, the transfer of files from a physical data room to a virtual one was one of the necessary steps for a company to grow.

M&A data room

Using a virtual data room for M&A

Compared to physical storage, M&A virtual data rooms have the following advantages:

  • Clear organization is easier due to an accessible folder structure.
  • Protected accessibility is seamless thanks to various permission settings.
  • The VDR can be accessed from any place in the world, at any given time. 
  • The integrity of documents will never be affected, as the virtual data rooms have backup copies of the files.

Many other benefits could be explored in specific use cases, as many VDR providers specialize in M&A and due diligence processes.

How to choose a Virtual Data Room for M&A?

M&A deals are important, so we need to make sure that we choose the right virtual data room for our demands. Here are a couple of features that your VDR needs to have:

  • Permission settings. You want to have complete control over who has access to what data room M&A documents. A wide selection of permission settings is going to make this possible.
  • Data tracking. Virtual data rooms can provide you with data about the time users have spent browsing through documents. You will also be able to see what kinds of changes have been made.  
  • Timed access. Apart from extensive permission settings, a virtual data room for M&A should be equipped with a timed access feature. It allows document owners to put a time limit on access to sensitive data. 
  • Watermarking. When downloading files, the virtual data room can automatically watermark the documents, stating when it was downloaded and by whom. 

Looking for these specific features will help ensure you find a reliable virtual data room for your specific M&A needs. 

Frequently Asked Questions

1.How to choose a suitable data room for M&A?

The data room for M&A should be easy to use, secure, and effective. It means that the perfect VDR should safeguard your files efficiently, and its interface should be simple enough for parties to use it without any prior training. Also, the data room should offer extended collaboration tools such as comments and highlights on documents and a Q&A section. And the service also should provide the business with useful statistics and insights to help an entrepreneur to close the deal quickly and successfully.

2.Why businesses should use data rooms for M&A?

A data room significantly accelerates deals by keeping corporate documents safe yet accessible for all authorized users. It eliminates the need to travel to discuss the details and review papers. And a VDR makes the whole process way easier by providing parties with all collaboration tools they need for the swift deal.

3.Are there data rooms creates specifically for M&A?

This service was initially created to simplify due diligence – the core of any M&A deal. Therefore, quite any data room will be perfectly suitable for Mergers and Acquisitions. All decent providers offer tools businesses need for this process. So feel free to choose the VDR you like – it must cover the M&A needs.

4.What is the purpose of the Q&A section?

Data rooms usually offer a Questions and Answers section. It’s meant to accelerate the deal by providing parties with all the information they need. Thus, instead of reaching out to each other every time someone needs to know something, parties can refer to the Q&A section. And if the required question is not there, they can leave it for the responsible person to answer it.

5.How to manage Q&A for the best efficiency?

You should assemble all the frequently asked questions and answers to them in advance so that the third-party will have some information on hands right away. If it is your first M&A deal and you don’t know what questions the third-party might have, you can find numerous examples on the Internet. It will be better if you assign someone to track the Q&A section and answer new questions as quickly as possible to accelerate the deal.

6.Why do M&A deals fail?

The companies preparing for an M&A deal need to prepare a big amount of data. This sort of transparency and a clear goal is often difficult to achieve while dealing with a physical data room. Thankfully a virtual data room can overcome these issues and the interested party can look through every single document needed for the deal to take place.