The enterprise needs a reliable, scalable, and secure platform that can standardize the work of all departments with unstructured M&A content to build a unified corporate information environment successfully. This article will explain the benefits of a digital data room for such kinds of transactions.
The data room: how to process documents securely during M&As?
The main goal of M&A projects is to achieve a synergy effect as a result of the merger of companies, consisting of the fact that the value of the merged company is greater than the total value of its constituent units. Various legal instruments are used to achieve this goal. Their practical set is primarily due to the risks that accompany such projects. The M&A transaction process is quite intensive. Months can be spent evaluating potential target companies with a thorough legal, due diligence analysis of their material information. This careful evaluation of their data – financial, commercial, operational, and otherwise – is essential to understanding the company’s current state and whether the transaction will be financially viable.
The main stages of the M&A transaction:
- Preliminary negotiations and drawing up a non-disclosure agreement.
- Assessment of the target enterprise.
- Checking the company for reliability.
- Signing an agreement.
- Integration after the deal.
In the practical implementation of M&As, at least two types of company valuations are made. The first type of assessment is carried out internally by the acquiring company and is an integral part of the due diligence procedure. Legal aspects include checking the statutory documentation, contracts, licenses, and other documentation to verify the company’s ownership of its assets. Thus, modern companies implement innovative digital technologies like a virtual data room to simplify the work with documents and arrange secure data management and collaboration.
Reasons to invest in a virtual data room
A virtual data room is an array of data processed and stored in a single digital space. The storage provides quick access to operational and historical information, obtaining forecasts and statistics based on available data. The IT market offers dozens of reliable and powerful data room vendors. You can read more about data room providers here.
There are the following reasons to use the data room platform as a background for M&A transactions:
- The M&A data room introduction, first of all, makes it possible to increase the efficiency of managerial decision-making by increasing the reliability of information and reducing the time it takes to receive it.
- It becomes possible to receive reports in the required detail quickly and automatically, reducing labor costs for its preparation and improving data quality.
- Single storage of data and setting access permissions allow you to use the accumulated information about the company as efficiently as possible within the framework of the task – from an operational report within a small department to an online dashboard on the status of all departments of the company, from analyzing simple indicators to predicting product prices using machine learning.
The data room platform is based on a three-tier architecture, which is essential for building reliable information systems. It makes common enterprise policies and content management services available to a wide range of client applications and enterprise systems without requiring that services be tailored for each type of client application. There are three main elements of the data room architecture – data repository, deal management tools, and secure collaboration.