19 May Start Protecting Your Trade Secrets in the M&A Virtual Data Room

Mergers and acquisitions require immense volumes of data exchange. A business (buyer) acquiring another business (seller) will definitely like to turn every stone before making the final move. But on the other hand, the company being acquired has a lot of challenges to face, and business data security is one of them.

Seller companies in M&As have to share every important information with the buyers. That includes patent rights, financial statements, employees’ details, company policies, marketing plans, and whatnot. The question arises; how to protect confidential data during M&As? The answer is “virtual data rooms.”

In fact, businesses around the globe are already using VDR for mergers and acquisitions. How can a virtual data room (VDR) protect your business data during an M&A transaction? Let’s find out!

What Is a VDR for Mergers and Acquisitions

An M&A virtual data room is a secure, online data storage place, particularly designed for seamless communication and data sharing during an M&A transaction. M&A virtual data rooms are equipped with modern features such as collaboration tools, project management tools, etc.

Using data room software, all parties involved in an M&A deal can collaborate on a centralized platform. They can share documents, arrange meetings, analyze business documents, ask for legal advice, and whatnot. What else can you do with an M&A virtual data room? Let’s find out in the next section.

How to Secure Mergers and Acquisitions With Online Data Room Software

1. Real-Time Communication

Communication barriers are one of the biggest impediments during an M&A transaction. Even an ordinary merger or acquisition is worth millions. That means both parties would be engaged in regular communication and negotiations.

Many M&A deals fail due to the two main reasons:

1. Lack of communication
2. Inability to access business documents timely

An electronic data room provides all necessary tools to ensure real-time communication between all parties. As VDRs are centralized platforms, users can ensure quick communication.

They can:

• Communicate privately (one-to-one messaging).
• Engage in group discussions
• Communicate through emails within the data room
• Arrange audio or video meetings
• Start poll for opinions/recommendations

2. Secure and Organized Data Storage

The seller company can use data room software to maximum advantage. Corporations that follow paper documentation systems find it tough to organize data and make it available 24/7. That’s because paper documents can only be verified during business hours, and the project management teams from acquiring companies may have to visit the premises again and again.

An electronic data room gives you the luxury of storing each and every single company file in one place. The good thing is you can store files in different formats such as images, audio, videos, and documents. You can store data in a hierarchical structure or whatever sequence you feel comfortable with.

Finding a document in a virtual data room is as easy as you like. VDR software allows you to search a file by entering file name, group, data size range, keyword, phrase, or a search tag.

Data rooms don’t just store your business data; they keep it safe. You can protect your data room from any unauthorized entry with the help of a two-step verification feature. All data room users can log in by entering their respective passwords and a one-time generated code which is sent to their mobile numbers or email addresses, minimizing the chances of unauthorized entries.

3. Controlled Data Sharing

Data sharing is probably the most challenging part of the due diligence process during an M&A transaction. Sharing highly sensitive company material with external parties is always a tough job for the sellers in M&As, but a virtual data room can make the data sharing process 100% safe.

Here is how:

• The data room administration can control document access; it can set access limitations on the users in the data room according to their roles and responsibility.
• Document access control allows the management to restrict any user from editing, downloading, or printing a document(s). The “fence view” mode makes sure that nobody can take screenshots or pictures of any document.
• Modern data room vendors have built-in, legally binding customizable NDAs (non-disclosure agreements) that can be signed electronically with the help of the electronic signature feature.
• Audit logs provide detailed reports on all activities in the VDR software.
• Screen recording features can be used to record video footage of communication or even the complete M&A process.

Best Virtual Data Room Providers for Mergers and Acquisitions

1. Firmex
2. iDeals
3. SecureDocs
4. Merrill
5. Intralinks
6. DealRoom

Final Words

Protecting your confidential business data during complex transactions like mergers and acquisitions is easier now.

Data room services give you complete control over your data; they are cost-effective and easy to use. No wonder they are already a vital part of the M&A market.