What is a data room?
A data room is a secure space used to house, organize and exchange data among parties involved in a strategic business transaction. Traditional data rooms are physical locations where paper copies of documents are compiled, stored and managed until a deal is finalized.
What is a virtual data room?
A virtual data room (VDR) is an online space designed for the same purpose as a traditional data room – secure storage, organization and exchange of documents among parties to a transaction.
Why use a VDR during an M&A transaction?
A VDR expedites the M&A transaction by automating manual processes and moving the information exchange online, so parties don’t have to travel to a physical location to participate.
During the M&A process, companies often share highly sensitive materials, including trade secrets and intellectual property. VDRs are more secure than physical data rooms and can embed security, such as automatic encryption and granular permissions controls, at the file level to safeguard each document throughout its lifecycle.
What is due diligence?
Due diligence is the phase of a deal in which the acquirer/buyer/investor performs extensive review of the target’s records and information in order to properly formulate a proposed value of the entity and structure for the deal.
What happens during due diligence?
Due diligence is essentially a fact-finding mission. The process consists mainly of the acquirer reviewing the selling entity’s contracts, financials, tax returns, board minutes and other essential business documentation to formulate an understanding of the target asset’s financial status and liabilities, as well as to ascertain the truth of the entity’s status and current and future business operations.
Due diligence also helps the acquirer formulate an adequate price to offer. Due diligence is the “make or break” phase of an M&A transaction. It is only after the thorough assessment during diligence that the acquirer calculates and offers a purchase price and the agreement of merger or acquisition is negotiated and eventually executed.
During due diligence, key stakeholders share and collaborate on highly confidential documents. To expedite the due diligence phase, a VDR is often used to automate tasks, simplify processes and streamline workflows. VDRs are also favored because they can prove to be more secure and economical than physical data rooms; and they enable sell-side deal teams to gain insight into the interest levels and amount of effort of competing bidders (potential buyers) during this crucial phase.
Is there really any difference between data room providers?
There certainly is. The best data room providers prioritize three critical elements of their platforms: security, ease of use and efficiency. Security is most important. Without absolute confidence that sensitive information is going to stay secure and the process will remain confidential, people won’t use the data room – and for good reason. User experience is important because an interface that’s fast, powerful and easy-to-use will promote adoption and improve return on investment (ROI). Lastly, efficiency is vital to closing the deal quicker without all parties incurring additional costs.
What are the risks in using a file sharing system vs a fully-fledged VDR?
File sharing systems like Dropbox™ and Google Drive™ might seem like low-cost, intuitive solutions for cross-enterprise collaboration – until your firm’s most sensitive data is maliciously or inadvertently compromised. These platforms lack the sophistication that an enterprise needs to collaborate efficiently across geographical and organizational boundaries, and once your firm’s files are outside your firm’s secure servers, there’s no accounting for where they might end up.
Why use a data room such as Intralinks designed exclusively for the M&A industry?
In addition to providing optimal security, efficiency and ease of use, Intralinks VDRs are designed to integrate easily with existing platforms, like SharePoint®. Our platform allows you to grant, track and rescind file permissions instantaneously, even after a document has been downloaded to a personal computer or device.
With an enterprise-grade VDR like Intralinks, you can securely navigate across organizational boundaries and firewalls, while ensuring your information is kept secure throughout the entire document lifecycle.
What happens during Q&A?
In an M&A deal, buyers want to know every detail about the asset they are potentially acquiring. The Q&A process provides buyers, analysts and subject matter experts (SMEs) the opportunity to exchange and work through questions and answers. This information exchange ensures that all the necessary documentation is provided and the details are understood, which is why it’s considered a critical step in driving due diligence to completion.
What's the best way to manage Q&A?
During the Q&A phase, many people are involved and vast amounts of information are shared and distributed, so the most effective way to manage the process is to establish workflows and centralization that is fully integrated into the VDR itself. The Intralinks platform defines roles for coordinators, SMEs, question submitters and others. It can automatically route questions to the correct SMEs, provide role-based controls to prevent responders from becoming overwhelmed with requests, organize files and communications to simplify the process and keep everyone on the same page with high-visibility dashboards. The end result: Questions don’t fall through the cracks, responses are timely and efficient and due diligence is driven to completion more quickly.
What should I look out for when choosing a data room for M&A?
In short: security, simplicity, insight and efficiency. Your choice in data room must ensure easy access for authorized individuals while preventing data loss, leaks and unauthorized viewing. To maximize adoption, it must be easy to use without extensive training. Finally, you need to be able to maintain tight control over document access and permissions while gaining valuable insight into the actions and activity of counterparties on your deal.
How does Intralinks mitigate risk under the General Data Protection Regulation (GDPR)?
Compliance with the GDPR across Europe will become mandatory on 25th May 2018, bringing with it a wide range of new challenges for businesses. Intralinks has a long history of commitment to securing and enabling high-value content within regulated industries and has been continuously demonstrating the strength of its data privacy framework by successfully completing more than 50 Client audits on an annual basis. In addition, Intralinks has a significant portfolio of capabilities to help customers minimize their risks under challenging regulations, including the GDPR. Learn more