M&A Data Room Software: Advantages, Insights, and Tips

Since M&A is a data-heavy and time-consuming business transaction, advanced teams worldwide leverage virtual data rooms to streamline the deal lifecycle in terms of data and stakeholder management.

Virtual data room solutions gain momentum across all industries. For example, the VDR market’s size was estimated to be worth USD 1629.69 million in 2021 and is expected to increase to USD 5497.68 million by 2030, rising at a CAGR of 14.73% from 2023 to 2030.

But while most companies confidently choose the advanced virtual data room for merger and acquisition transactions, initial public offering, capital raising, some continue to hesitate.

We invite you to discover how a virtual data room serves as an M&A facilitator, check the best data rooms, and get tips on making your storage an all-encompassing resource for M&A participants.

What is a data room for M&A?

A virtual data room (VDR) is a secure platform that organizations use for storing and sharing financial statements for business transactions.

From the buy-side M&A perspective, a VDR is the most secure cloud solution for presenting sensitive data. At the same time, the sell-side M&A decision-makers benefit from the ability to access all essential corporate records in seconds from anywhere in the world.

Unlike traditional data rooms, this online solution allows the parties to conclude a cross-border transaction without traveling, which is highly beneficial regarding time and cost savings. VDR also outperforms outdated physical data rooms by delivering impeccable cloud storage security, data and user management automatization, and efficient collaboration solutions.

Virtual data room software helps carry out even the most complex financial transactions quickly and efficiently. More specifically, it allows:

Storing, organizing, and sharing sensitive documents with potential buyers or other interested parties
Collaborating and communicating on confidential documents related to a transaction
Assigning tasks and tracking progress

Now check out the top advantages and features of virtual data rooms for merger and acquisition transactions.

Top virtual data room providers for M&A

Since online data rooms differ in features and capacities, you should choose a provider responsibly. The more the solution fits your M&A needs, the more value it will bring.

So, now you can compare virtual data rooms considered to be the best for complex business transactions, including mergers and acquisitions.

Provider	Key features	Performance
iDeals	Automatic index numbering Multi-layered data encryption Two-factor authentication 8 levels of granular permissions Advanced reporting tools 15-language user interface In-app live chat support 24/7Mobile access Custom branding	iDeals virtual data room organizes an unlimited number of M&A files in a structured way using automatic indexing. In addition to the neat data room structure, you get an ultra-secure online repository powered by encryption, granular permissions, reporting tools, and other efficient security measures. Also, the solution simplifies international collaboration since it supports multilingual access. Finally, the provider’s benefit is its industry-leading support, with an average response time of 30 seconds, available on weekends and holidays 24/7.
Firmex	Advanced user management Digital rights management Drag-and-drop upload Email In	No matter how many users you invite during the due diligence process, you can easily manage them individually or in groups by setting up user permissions. With digital rights management, you can restrict access to viewing, printing, and saving documents and apply watermarks. In addition, Firmex makes uploading files a breeze with the drag-and-drop tool. And the Email In feature, in turn, allows M&A participants to securely upload confidential documents to a data room from any device and any location.
Intralinks	Lifetime data protection Dynamic policy management Deployment flexibility Zoom integration	Despite the location or device, control is maintained throughout the document’s entire lifespan, whether at rest, in transit, or in use. Furthermore, dynamic policy management allows for the updating and revocation of rights and permissions even after another user has downloaded a file. Intralinks web access, desktop programs for Mac and Windows, and mobile apps for iOS and Android are of great value for data room access. This way, attorneys, investment bankers, and other parties can work whenever and wherever they choose. Finally, the built-in Zoom provides virtual data room users with online meetings in the digital space they have already mastered.
Datasite	Streamlined data organization Intelligent redaction Search in 16 languages	In the Datasite data rooms, authorized users can prepare sensitive documents of various formats, including PDF, Office, images, videos, and more than 200 other formats, significantly speeding up due diligence. AI-enhanced redaction finds and tags +100 types of data, including names, addresses, and many other GDPR-related terms. Moreover, you can redact words and images. Also, the text search powered by optical character recognition finds the files you need right away. And when new files matching your search criteria are added to the storage, you get a notification.
Workspaces (WatchDox)	File synchronization Multiple integrations File usage reporting	Since all participants in M&A due diligence must be on the same wavelength, Workspaces automatically syncs document versions on all devices and for all users. Plus, the virtual data room provider enables using the tools you know well without leaving Workspaces. Thus, you can connect data rooms to OneDrive, SharePoint, Dropbox, Windows Files Shares, iManage, and other repositories. Finally, admins can access the file activity log at the level of user, document, date, location, device, and IP address for real-time insights, which other virtual data room providers may not offer.

Most virtual data rooms provide potent opportunities for secure document sharing and a simplified deal management process, with some focusing on security features and others — on streamlined data management. So how to make the best choice? Just set priorities for your M&A strategy and choose what is vital for your team.

How do VDRs simplify the M&A process?

The importance of virtual data room solutions for due diligence and M&A is confirmed by the positive experience of different industries, which always get:

World-class security compliance
Full control of the process
Easy communication
Fast transaction execution
Conducting due diligence process online

There are plenty of reasons for the spike in demand for a virtual data room, such as convenience and increased productivity. Additionally, using a virtual data room for business transactions provides:

1. Top security compliance

Trustworthy VDR providers undergo rigorous audits and certifications according to high-grade information security standards. For example, when a virtual data room for business transactions complies with ISO 27001 or GDPR, it means that its physical and technological document-storing solutions are strictly regulated.

Notable feature: Encrypted immediate data backup dramatically reduces the risk of security breaches or destruction.

2. Deal centralization

A well-organized virtual data room for due diligence and M&A resembles a live control board that allows the seller to oversee every process and make prompt adjustments when needed simultaneously.

Notable feature: Single sign-on allows the virtual deal room administrators to run several projects simultaneously. Such process unification also allows sell-side M&A drivers to vet and consider several interested buyers privately.

3. Transparent user control

The larger the deal, the more people will need access to confidential documents. VDR software offers multi-level access rights adjustments, and automatic data room activity reports to help the seller evaluate the degrees of confidentiality and engagement.

Notable feature: Time and IP document access restrictions take user supervision further, letting the sell-side M&A admins remain in charge of the deal flow and confidential data security.

4. Enhanced communication

With an online data room, the buy-side M&A representatives don’t need to meet physically with the seller to ask questions or request additional data. And when many people are involved in the M&A process, digital discussions prove to be more inclusive, effective, and less time-consuming.

Notable feature: An interactive Q&A tool allows all M&A data room software users to get answers faster and learn more about the deal by reading other inquiries and responses.

5. Faster execution

The sell-side M&A facilitators can add the necessary data or update existing documents and notify other users promptly. This significantly reduces the wait time for all parties and accelerates decision-making.

Notable feature: Complete user activity reports allow spotting any overlooked areas of the M&A process.

6. Straightforward due diligence process

The virtual data room for due diligence and M&A often comes with templates and checklists that simplify and streamline due diligence. Considering how complicated the vetting process can be, such guidance is an excellent asset to experienced sellers or first-timers.

Notable feature: 24/7/365 multilingual support provides additional instructions and resolves technical issues.

7. Value at every stage

Apart from streamlined due diligence, a virtual data room can improve every other transaction stage, from pre-deal marketing and analysis to post-transactional integration.

Notable feature: Flexible pricing plans allow you to restructure and use your virtual data room for other purposes once the deal goes through.

What to include in the M&A virtual data room?

The ideal data room is the one that helps investors and buyers investigate all the deal’s aspects.. Therefore, we have prepared a checklist for you to use to avoid mistakes when collecting key documents. But keep in mind that the following set of deal documents may vary depending on the industry, the transaction goals, and the parties involved.

Legal documents: overview of IP and trademarks, trade register extracts, bylaws, company and legal structure, and details on collaboration with law firms.
Agreements: list of all leasing and shareholders’ agreements.
Intellectual property: certifications, permissions, approvals, and licenses.
List of current directors, officers, and shareholders.
HR documents: CVs of key personnel, contracts of key employees, and standard working contracts.
Clients: a list of the top 20 clients or distribution channels or customers and standard customer contracts.
Supplier documents: three leading supplier agreements.
Finances and taxes: audited financial statements, financing agreements, and tax accounts.
Insurance policy details.
Current business plan and management reporting.

How to use virtual data rooms in M&A transactions?

Using virtual data rooms for mergers and acquisitions is easy and beneficial when you find the right provider and know all the necessary M&A experience stages. So, here is what you should do:

1. Choose the most suitable VDR providers. Ensure that the data room provider you choose meets all of your expectations and complies with global security regulations.

2. Register your user account. Fill in the required info and get the access credentials to your new virtual data room.

3. Establish an easy-to-follow data room layout. Use templates and charts to create the most logical and clear flow. Use the virtual data room “View As” feature to assess the structure from various perspectives.

4. Assign access to all potential visitors. Set advanced permissions for groups and individual users, considering all potential need-to-know scenarios.

5. Upload files into the folder structure. Use bulk upload and automatic indexing to save time during file-sharing. Make sure the virtual data room you chose offers a full-text search to navigate through documents.

6. Invite other users. Send out customized invitations to involve all vital personnel in the virtual data room for business transactions.

7. Process the deal. Go through the transaction one step at a time and make adjustments to the virtual data room along the way if necessary.

Key takeaways

Here are the most critical points from the guide:

The most important features of a data room are two-factor authentication, granular permissions, advanced reporting tools, drag-and-drop upload, and intelligent redaction.
The main benefits of a data room solution are bank-level data protection, centralized due diligence M&A space, transaction transparency, and seamless collaboration, all of which add value for all companies involved.
Top data room providers are iDeals, Firmex, Intralinks, Datasite, and Workspaces.

Frequently Asked Questions

How to prepare an M&A data room?

Use templates and checklists that data room providers offer based on the type of transaction, the number of participants, the industry, and the size of your business.

What documents should be in the data rooms?

An indicative list of documents includes basic corporate data, share capital, financial statements, intellectual property, material agreements, information about suppliers and manufacturers, disputes, insurance, employees, related transactions, and other assets.

Are there potential problems in preparing a virtual data room?

Outdated documents, unsigned protocols, contracts, shareholders’ decisions, an incomplete capitalization table, incomplete patent documents, missing share purchase agreements, or temporary office files may cause the buyer to require the elimination of errors as a condition for closing the deal.

Who controls the platform?

Typically, an executive or other upper-management employee controls the platform. The owner of the virtual data room acts as the key administrator and customizes document access rights and controls to other participants.

Why do companies prefer an online data room?

Compared to a physical data room, virtual data rooms allow users to manage and complete transactions much quicker. In addition, the modern VDR’s functionality enables remote deal-making by providing top-grade data room security, document management options, access level permissions, user tracking, and collaboration tools.