Step-by-Step: How to Set Up a VDR for an M&A

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M&A deals can be a complex process that can overwhelm potential buyers and sellers and other third parties involved. The process has the potential of burying all parties in an avalanche of paperwork, repeat requests, and wait-times. These slow, often tedious tasks and processes can lead to costly errors, consume valuable time, and can ultimately kill deals. With all of that, companies and organizations have sought ways to simplify the process and employ less time-consuming methods. This is the reason that virtual data rooms (VDRs) have become standard for most merger and acquisition deals. With the globalization of business operations today, many bidders, buyers, sellers, and other third-parties are scattered around the world. A virtual data room set up for an M&A transaction can allow all parties to work together in an effective, and efficient manner from anywhere.

Throughout the lifecycle of a deal, a VDR can simplify the process and add value to the transaction. As a result, a majority of firms are using virtual data rooms for due diligence processes and M&A transactions. With the growth of virtual data rooms in the mergers and acquisitions process, enterprises must have a firm understanding of the roles and functions of the VDR and what they can do for the M&A cycle. Let’s take a look at how a VDR can aid the M&A process and how to set it up.

Virtual Data Room for M&A


During an M&A process, and especially the due diligence portion of the transaction, investment bankers, buyers, sellers, law firms, and other interested parties require a way to store and share confidential information. A virtual data room for M&A gives all parties involved in the deal a reliable and secure location to request, share, organize, and store sensitive information efficiently. Virtual data rooms facilitate collaboration among all stakeholders and integrate features that can help expedite due diligence and maintain workflows. Besides providing a place for secure document sharing and collaboration, a VDR can also reduce wait times and allow users to analyze and submit required documentation in real-time.

Assessment and Gathering


Setting up a VDR for an M&A transaction first requires gathering the required documents. Similar to a physical data room, an online data room needs to house all of the necessary sensitive documents, data, and other information that will be necessary to complete the deal. Potential buyers, sellers, lawyers, and other parties will need access to a host of materials to fulfill their responsibilities. The documents could include financial reports and statements, legal documents, asset lists, and insurance policies. The necessary information will depend on the deal and the details of the transaction. Conducting a needs assessment to establish the needs and requirements of the client will help solidify this list. This step will give the VDR provider an idea of the ideal storage capacity and let the room administrator plan for the number of users expected for the VDR. Once this is done, the administrator can create the VDR.

Scanning and Uploading


Once the VDR is created, the next step is to upload the necessary documents. Administrators will gather and compile documents based on the needs assessment and then scan and upload them to the VDR. Once all of the items are uploaded, indexing will follow. The VDR provider will also create an online index. It is important to have a set of policies and procedures in place when it comes to naming and numbering conventions. Files could be arranged alphabetically, numerically, or even chronologically. Whatever guidelines are established, the most important thing is to maintain uniformity so that the data is presented in a neat way that can be easily analyzed.

Security and Maintenance


In this step, the VDR is implemented and users begin to interact with the uploaded information. The administrator will need to set up the permissions and security levels for the room and more sensitive documents. Since all parties entering the online data room might not need access to all documents, the administrator can set specific user permissions and user access protocols. This step will be an ongoing process since security checks and maintenance reviews should be conducted on a regular basis. Parties will surely have questions that need to be addressed and that there may be some additional sensitive documents that need to be uploaded later. It might also be that documents need to be updated or deleted. Regularly monitoring the online data room will ensure that the room stays current to expedite the deal.

Just as you would take care of a physical location that houses financial documents and other sensitive materials, so, too, you should make sure that only the right people have access to your virtual deal room. Upload the materials, designate levels of access, and make sure to do regular security scans. All this will ensure that your data room is ready for any M&A your company takes upon itself.

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