M&A is a way to grow a business and strengthen its market position. However, this process has many features. In this article, we will discuss the role of Data Room solutions during the deal.
Data room solutions in M&A deals
The rapid economic and technological changes taking place in today’s globalized world are leading to significant corporate reorganizations. Companies seek to increase the efficiency of production processes and enter new markets. One of the most adequate prerequisites for successful adaptation to these changes is a merger. Every day, investment banks conduct millions of dollars in transactions, which determine the strategy of participating companies for the coming years.
If in the last ten years firms have carried out mergers and acquisitions mainly due to the boom in financial markets, today the key factors in the dynamic development of the M&A market are the strategic motives of companies, economic growth, the emergence of new investors.
The main motive for companies to participate in M&A processes is to achieve a synergistic effect, which is manifested in economies of scale, implementation of advanced methods and latest technologies in the merged company, the emergence of new opportunities for expansion, development of specific skills of both companies. A well-thought-out and organized merger or acquisition transaction can be the basis for a company’s survival and growth.
The IT services sector is experiencing exponential growth in several key segments. Most of the mergers and acquisitions in this sector have been driven by digital disruption as more and more companies adapt their systems to cloud computing. This continuous digitization and modernization of traditional industries are driving an increase in orders for IT service companies. Thus, modern IT security solutions provide reliable encryption technologies for conducting such processes. A great example is using a Virtual Data Room.
So, what is a data room? It is a single, large data warehouse, which is determined once and then used simultaneously by many users – representatives of different departments. Instead of scattered files with redundant data, all data is collected together with a minimum amount of redundancy. The Data Room is no longer belongs to any single department, but is a common corporate resource. And the database stores not only the working data of this organization, but also their description.
The due diligence is carried out on the basis of a data room collected by the seller, taking into account the recommendations of the seller’s lawyers. The data room may be populated from time to time with documents requested by all of that buyer’s lawyers. During this due diligence, buyers also send inquiries to their consultants about the target company.
Benefits of using Virtual Data Room
There are the following advantages:
- Efficiency. Cloud services often offer more robust data recovery mechanisms that organizations often forget about or invest in. And can also provide peak power, which would be economically unprofitable without the use of clouds.
- Speed. Cloud services can be quickly set up as well as scaled as the business grows.
- Cost reduction. First, the cloud allows you to save on initial investment in technological capacity when the company does not yet understand – what capacity it will have enough. And secondly, these services help to save on devices and software, as well as on the salaries of people who would serve their own IT infrastructure.
Storing documents in Data Rooms makes the lives of many companies easier. For example, all employees have free access to the most up-to-date versions of files and can access them from anywhere in the world where there is the Internet.