A virtual data room is a secure storage solution that has become an invaluable tool for the success of mergers and acquisitions. There used to be a time when securing your documents and relevant data was a headache. Businesses needed to invest in large and expensive vaults, locked metal cabinets, or store documents in banks.
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However, as the world shifts to digital solutions, it no longer made sense to follow the old method of storing voluminous documents on one physical facility. Technology gave rise to the
virtual data room, which allows companies to go paperless in their transactions.
Today, mergers and acquisitions (M&A) almost exclusively use a virtual data room as they perform due diligence on the planned business transaction.
How Virtual Data Rooms Save You Time and Money
Storing and sharing large volumes of documents for a business transaction is time-consuming and expensive. For instance, you need to photocopy hundreds of pages concerning the M&A. Then you need to pay for a dedicated staff to make sure you make all copies.
You not only pay them their regular wages, or probably even overtime, but you also take them away from their core tasks.
Then you need to spend money on the logistics to ship over the documents to your potential partner. Aside from suffering delays as the delivery process consumes time, it is also a risky proposition.
What if the messenger misplaced the documents, and it ended up in the wrong hands? There is a reason why M&A transactions are confidential–any leak could have disastrous consequences for the company. It is especially true when you are a publicly listed company. Your stocks will plummet if people get wind of the news that you are selling.
Instead, a virtual data room will allow you to share information in a secure platform. You upload the data, and the other party can immediately download it, which eliminates intermediaries.
Other Benefits of Virtual Data Rooms
Going paperless will also yield several advantages:
- You can immediately pull out a particular file with the use of a localized search engine
- You can make folders and label them to organize your documents properly
- You save space in your building
- You do not have to worry about securing the data room since the service provider will assume that task
- You can make quick decisions, which is crucial for time-sensitive transactions
- Your process is very transparent as anybody with authorized access can review the documents anytime they want
- The virtual data room can make the due diligence process easier. No more reports to photocopy and staple. No more paper to be sent over through the messenger
- You can track your expenses because the service providers charge a flat rate or per page.
The rising popularity of virtual data rooms is warranted. People understand the benefits of shifting their M&A processes to modern methods.
According to estimates, the global virtual data room segment has a compound annual growth rate of 14.5% from 2019 until 2027. At the end of the forecast period, the market would be valued at $3.66 billion. The main driver of growth is the increasing demand for mergers and acquisitions.