Structuring Virtual Data Rooms for M&A Transactions

The advent and use of modern technology have made the traditional methods of record-keeping and storage run out of fashion and deemed redundant. But given the necessity of being able to share and access documents across the planet to potential M&A customers, we need to ensure that there are no risks of a data breach. So, How do we do that? The Answer sure is Virtual Data Rooms.

What are Virtual Data Rooms?

A virtual data room is an online repository that is provided with the highest perimeters of security to store and share files that are confidential in nature with multiple prospective clients or buyers across the globe. So how does that work? The idea is to provide access privileges to the viewers and users of the files based on what they need that is set by the administrators through user-specific restrictions and the M&A process of due diligence.

In order to ensure that the VDRs are running and used to their best efficiency, we need to make sure that they are organized and structured in a meticulous manner. In this article, we will walk you through the importance of Structuring a VDR for M&A transactions.

Opening Books with Your VDR

When you are under scrutiny for a due diligence process you need to make sure that your “books” are open to your prospective buyers that in turn may lead to an exposure of confidential and sensitive documents. This process and approach of “opening the books” progressively ensures that your data security is intact during the entire transaction. Let’s walk you through these steps.

Step 1:

 

The first and foremost step in any M&A deal is to create an opportunity for potential buyers to get interested in your products. In this step, you can structure your VDR to make short snippets of useful data that pitch your business perfectly without disclosing your company information and any other confidential details.

Step 2:

 

Once your potential buyers from Step 1 are ready to come on board and sign the NDA (non-disclosure agreement), this is where you start opening up a little more. At this stage, your VDR can share all the relevant company information, financial model and memorandums and some dive in detail about your business.

 

Step 3:

Buyers who are all ready to do business with you after going through all your documents in Step 2 will submit an offer in the form of a “letter of intent”. After you go through all the offers you can then choose the best one and then enter into an exclusive period of due diligence with the buyer.

At this stage, your prospective buyer will gain full access to all your file systems and suites that are in your VDR. They may then review all the supporting documentation provided by you and then proceed with the final purchase based on what they see.

You can structure the documents in your VDR based on the following:

  • Generic Corporate Matters
  • Tax-Related Matters
  • Financial Information
  • Marketing, Sales Volumes and Customers
  • Intellectual Property
  • Engineering and Customer Support
  • Employment Matters
  • Commitments and Agreements
  • Legal matters, Insurance Matters and Environmental Matters
  • Any other miscellaneous documents

Now the Benefits

By now, though you might have got an idea of how beneficial VDRs can be with M&A transactions we will explicitly list how they are beneficial. Let’s have a closer look:

  • VDRs are an excellent housekeeping option and using a single virtual data room to store all your information and files rather than using a lot of confusing solutions creates a clean first impression on the mind of a prospective buyer.

 

  • VDRs make it easier for you to let your prospective buyer view the relevant details without worrying about a security breach thereby expediting the due diligence process and increasing your chances of having a successful transaction

 

  • Using dedicated virtual data rooms during the due diligence process helps you to organize your business in a more efficient manner with access control mechanisms and other security features in place.

 

  • No matter what you store and use your VDR for, it guarantees to protect all your confidential and highly sensitive information with foolproof security.

Conclusion

So, Virtual Data Rooms as we learned is an important asset to any organization that intends for an M&A deal in the near or far future. That’s because it keeps your business information organized and ready to intended buyers instantly. Having said that, structuring your VDRs is important too, as without a proper structure your data cannot be organized.

 

As such VDRs coupled with some efficient structuring is key to a successful M&A deal. Time to make the most of these resources today.