This article is a guest post from Francisco Lorca, CEO of EthosData.
Many M&A transactions utilize a virtual data room – an online, secure location to maintain the confidentiality and control of deal documents. The article explores the use of virtual data rooms in due diligence and other settings.
In recent years the usage of virtual data rooms has increased dramatically, both in M&A transactions and in other aspects of corporate document sharing. While North America remains the biggest user of the technology, Europe and Asia are rapidly closing the gap. The rapid growth in the adoption of virtual data rooms for M&A transactions is related to a number of key advantages. Data room technology offers the ability to reach across borders. It speeds up processes by reducing time frames and frustrations of document access during high-level deals, and it provides peace of mind to all parties involved.
Below are some examples of situations where the use of a virtual data room can help when sharing confidential information:
The world of global finance is underpinned by a heavy reliance on security and confidentiality. During a merger, acquisition or initial public offering, for example, your financial and legal experts need extensive information-sharing capabilities while they conduct their due diligence. Data rooms improve the speed and communication of this by making it possible to alert all parties to the availability of new documentation. In the complex area of structured finance and securitization, it’s critical for players to comply with detailed SEC rulings on issues such as user access and the lifetime of the information. Using a service provider with the right resources completely transforms this process.
The ability to monitor the fund independently is always a winning factor for managers, whether they are working in private equity, venture capital or hedge funds. A virtual data room makes it possible for you to comply with transparency requirements while keeping control over the information. You can prevent confidential, sensitive material from leaking to your competitors or the press by restricting access and user permissions such as printing and downloading. At the same time, distribution of marketing materials, reports and other information is made much easier.
Virtual Board Room
Communications between your management team and the board of directors is also transformed beyond the traditional security and time concerns of using a physical environment. Data room technology enables you to share sensitive documentation with board members around the clock, regardless of their location, while still complying with the requirement for due diligence. This completely removes the risk of sending confidential items by email to personal accounts, concerns about breaching your company’s firewall, or the risk of compromising the legal requirements for corporate materials. Boards can use virtual data room options whenever they have issues to table, as a means for circulating the information and collaborating on the wording of the formal motion.
During any legal process, administrators have great demands on their time and are not interesting in traveling through complex folder structures to track down documentation. Most legal issues involve more than just in-house parties, so shared access and collaboration are vital to enable the process of e-discovery, cataloging and storage of information relating to cases. Legal professionals can use an exclusive virtual data room to make case notes that are seen only by those to whom they grant access through the use of multi-tier permission levels.
In the life sciences industry, millions of dollars are spent annually in the development of new medicines, environmental protection and genetic research. As a highly competitive, lucrative and global field, security cannot be compromised and documentation often needs to be shared across great distances. The intellectual property of material is used for licensing, obtaining funding for future research, and the success of a company is dependent on the knowledge available. Virtual data rooms are ideal for companies needing large quantities of secure, online storage.
With most business operating in a global framework, sharing documentation in a secure virtual environment can save your company the huge sums of money that you previously spent on traveling, or on sending information by couriers, as well as giving you peace of mind that the process is secure and efficient.
You can read more about virtual data rooms in our dataroom blog at blog.ethosdata.com.
About the Author
Francisco Lorca is Founder and CEO of EthosData Ltd, a global provider of virtual data room services. More information is available at www.ethosdata.com.