When businesses are merging, buying or selling, buyers must to perform due diligence on the company they are thinking of acquiring. This usually means visiting a secure site set up by the seller where the prospective buyer can review transactional documents to help them make the decision on whether to bid on the company, and how much.
The process of setting up such a data room and the effort required by the prospective buyers means that the system is lengthy and costly from both buyer and seller perspective.
However, as with many processes in recent years, data rooms have moved to the cloud. Virtual data rooms provide exactly the same information at a fraction of the cost with no extraneous effort required from buyer or seller.
Here are five reasons you should choose a virtual data room over a physical data room for your merger or sale:
1. Increased security
Some people may be concerned about the security of confidential documents stored in the cloud, particularly when external users are accessing them. However, a virtual data room can in fact be more secure than a physical data room. Each data room is set up with unique log in details for each potential buyer so no one can access the data room without authorisation. Permissions can be set on a document level basis, determining whether individual documents can be copied, exported or just read.
2. Unlimited access
Unlike physical data rooms, which potential buyers must make appointments to visit and only during business hours, virtual data rooms can be accessed at any time without the need to make an appointment. Not only does this make the diligence process much more convenient for potential buyers, but also means that the seller does not have to coordinate buyers’ visits.
3. Faster due diligence
When a buyer needs to access some information they can quickly access it when they need to wherever they are, instead of having to set up an appointment to visit the data room. As well as this, multiple buyers can access the virtual data room at the same time, which further condenses the time that due diligence takes.
4. Insight into buyers
Often, sellers have very little information about potential buyers who are visiting their physical data room. But with a virtual data room, a seller can see what what the buyers are looking at in the data room, how many times they have visited, and answer questions through Q&A to gauge how interested a potential buyer actually is.
5. Cost savings
Typically, physical data rooms are expensive to set up, requiring employees to set up and prepare thousands of hardcopy documents, hire of a secure location, and employment of security staff. With a virtual data room, the sole cost is for the set up of the virtual data room, at a fraction of the cost of a physical one. Potential buyers save too, as they don’t need to spend the cost of travelling to the physical data room.
The benefits of using a virtual data room rather than a physical one are huge. The revolution towards the cloud has well and truly changed the way we do business, and helps to streamline the sale and merger of companies. Speeding this process up and bringing down the cost increases competitiveness and allows for greater turn over, ultimately resulting in a more agile market.