A virtual data room for mergers and acquisitions can help reduce the burden of due diligence. It can reduce the need for photocopying documents as well as the costs of indexing and travel that are associated with physical data rooms. It can also make documents easier to locate through the use of keywords. It can also permit bidders to conduct due diligence from any location in the world.
A VDR lets companies comply with regulatory requirements by modifying access for users and providing an audit trail. For example, a company can limit access to certain folders, such as those that contains details of employees’ contracts, to ensure that only senior human resources and management are privy to access to that information. This is crucial because it helps prevent accidental disclosures of private information, which could damage a deal or result in a lawsuit, claims Ross.
VDRs can also reduce the risk of data breaches which is among the biggest concerns for M&A participants. According to a study conducted in 2014 by IBM human errors are the primary reason for data breaches in 95% of cases. However, a virtual data room can help reduce the risk of a security breach by encrypting all information and employing a variety of security measures, including two-factor authentication, multiple firewalls, and remote shred.
It’s worth taking the time to sketch out the way you imagine your ideal VDR structure before starting the M&A Best Practices of Private Equity Due Diligence process. It could be as simple as sketching out a rough sketch on paper or as detailed as a schematic in a graphics editing software.