How to Prepare a Virtual Data Room for M&A Deals

A well-organized virtual data room (VDR) is essential for an efficient and streamlined M&A process. Users can utilize online data room software to provide participants with all the information and data they need at all times.

As such VDR software is a worthwhile investment for companies of all sizes. However, you still need to prepare the data room for optimum effectiveness.

Within this article, we’ll be looking at how you can structure your VDR software to ensure any M&A deal is as smooth as possible.

1. Design a schematic of the VDR beforehand

Organizations will benefit more from a VDR if they design what it should look before the M&A process starts. Working from a schematic ensures you can operate faster once you have the investment ready to acquire the software. In addition, you’ll also benefit from knowing which documents you’ll need and how you should be able to access them.

Even if you only have a rough draft, you’ll be in a much stronger position than if you designed the VDR data room with no plan at all. Start by drawing squares to represent major files and then list the files you’ll need in those categories at the beginning of the M&A process.

2. Ensure the relevant people have access

While you may be tempted to invite as many people to the VDR as possible to increase transparency and communication, too many people can lead to potential data leaks and a diminished return. As the old adage says: too many cooks spoil the broth.

Follow these considerations to ensure only the most relevant people can access the virtual data room services.

1. Avoid giving casual buyers access to all information in the VDR, even if they have signed an NDA.

2. Make sure only the HR department and upper management can see your ‘Human Resources’ folder, particularly if it contains sensitive contracts and other personal details.

3. Ensure commercial and financial transaction information is highly restricted.

3. Put together a logical filing system

If you have drawn up your VDR schematics correctly, your filing system should be easy to complete. Ensure buyers have access to a master file with all the documents they need right away such as the NDA, teaser, pitch deck, and more.

You should also make sure you have a separate folder from highly sensitive documents straight away. You can assign access to senior management and buyers who are further along the due diligence process. You’ll also need folders for the following documents:

• Marketing packages (teaser, NDA, etc.)

• Financial (statements, outstanding loan details, etc.)

• Legal documents (contracts, IP, share certificates)

• HR documents (resumes, salary details, pension information)

4. Add relevant documents: Make sure they are up-to-date

Organizations should ensure that all documents are relevant and up-to-date. Most outdated documents with incorrect information are of little value to the due diligence process. Also, if they are taking up space in your online data room software, they will be costing your organization money.

5. Interact continuously with your VDR

Companies who only use their VDR software sparingly are wasting money and creating an inefficient virtual space where M&A business will not be as effective.

If you engage with your VDR data room often, you ensure any outdated documents are removed, confirm the right people have access to specific documents at all times, and maintain the security of your sensitive materials.

If you conduct all your business and file sharing through the VDR you run less risk of creating duplicate documents and facilitate a faster process where everybody is on the same page at all times.

Bottom line

In conclusion, an organization can prepare their virtual data room to ensure the M&A process is as painless and efficient as possible. From drawing up the schematics to checking the VDR regularly, you’ll create a working structure that benefits the company as a whole and helps any deals get over the line without any issues.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes