Before SaaS was available, companies going through mergers and acquisitions (M&A) would conduct their due diligence in a physical data room which would contain hundreds to thousands of documents needing review. A bidding party and their associates would need to be flown out to the data room location and enter the physically secured room to complete their document reviews. This process was, and still is, incredibly time consuming, costly, and environmentally unfriendly - it also greatly reduces the amount of potential buyers/investors that companies can present their documents to in a specific period of time.
To try to expedite the process companies began sending couriers to guard documents and take them to their bidders, this could be risky though with the possibility of a vital forgotten file.
Other companies ship their important documents via FedEx, UPS, and USPS. Mail delivery is not a secure route and often times businesses are left wondering whether or not potential investors have even looked at the sent documents - or if those documents were received in the first place.
Seeing a need in the business world to ease the M&A process, virtual data rooms or deal rooms were created. They have opened up a new industry for secure document storage and sharing software.
There are two important purposes for a secure virtual data room:
- To streamline the M&A process while keeping sensitive information secure and accounted for
- To keep a secure online repository for all important and sensitive company documents
With a virtual data room a user may invite multiple investors and lawyers to do their due diligence simultaneously. Having all documents organized and easily accessible will give investors confidence in the business. In addition to the quick distribution to interested parties, the data room owner may track how active those specific parties are in order to spend more time connecting with those who appear more interested in their company. With the time and money saving benefits, having a deal room can be the difference between a yes and a no from investors during an M&A transaction.