Over the years, the increase in the digitization of both personal and business records has made it possible for organizations to streamline their day-to-day processes while reducing their total operating expenses. One example of this efficiency is in the deployment and management of Virtual Data Rooms (VDRs).
In the past, companies engaging in mergers and acquisitions (M&As) or those in need of better information privacy needed to rely on physical data rooms. These secure rooms house rows of data reserved for secure document exchanges, file sharing, legal transactions, and financial due diligence. However, these facilities are notoriously costly to manage and lack the transparency and accessibility that most organizations need today.
VDRs differ from traditional data rooms in that they provide a secure online repository of information where organizations can facilitate any number of legal and financial transactions while having direct visibility of all user activity and exchanges. Moving to a VDR environment can provide several benefits to organizations, including a safer, more reliable means for growth and sustainability.
Here are four signs the time is right for your organization to deploy a virtual data room.
You need to ensure proper due diligence
One of the main issues associated with due diligence reporting is information security and accountability. Balancing both visibility and control over sensitive documentation can be a struggle and demands an efficient process to manage successfully.
Maintaining a virtual data room is simple and cost-effective, and provides added security when starting due diligence processes and managing document access. VDRs give businesses complete control over third-party access to financial statements and other pertinent information necessary when completing M&A transactions. Unlike physical data rooms, VDRs offer full transparency into the document chain of custody in real-time and from anywhere in the world.
You need a more secure document storage location
Data security is a major concern for organizations today, especially in the safe storage of their digital assets. Therefore, when operating in a digital space and sharing sensitive business materials, companies need to ensure they take the precautions necessary to protect themselves, clients, and potential investors.
Virtual data rooms offer a variety of features in safe and secure document storage, while also providing automatic, encrypted backups in the event of service disruption. VDRs provide administrators with secure identity management solutions, ensuring only authorized users can access stored documentation, and features like multi-factor authentication offer additional layers of security. Using 256-bit symmetric encryption, these added security features give businesses the assurances they need to operate safely and efficiently in a digital environment.
You’re looking to attract higher quality investors
Physical data rooms can be restrictive in both size and scale, but they are also costly to manage and aren’t accessible to all third parties. In the past, if you wanted to engage with international investors in M&A transactions, it was necessary to plan for these third parties to travel to the physical data rooms where due diligence could be completed. In many cases, this would limit your pool of potential investors considerably.
VDRs remove location-based data access restrictions by enabling quick, seamless access to your shared documentation in real-time from anywhere in the world. This added security and accessibility often attracts a much broader range of interested parties and leads to more bids and better options during a merger or acquisition.
You need a more efficient way to communicate with partners
During a merger or acquisition, communication is absolutely critical from the outset. Not only should your documentation be transparent and answer any questions potential buyers might have, but it’s important to remain accessible in the event further clarification is needed or additional reports are required.
Virtual data rooms streamline communication between buyers and sellers by allowing companies to view document activity reports, send and receive disclosures and updates, and answer questions directly through online managed communication tools. This helps businesses to have a better understanding of a deal’s progress while increasing efficiency when working with third parties.
Businesses of all shapes and sizes continue to use virtual data rooms for a variety of reasons. By deploying a VDR for your organization, you can create a safer, more reliable means of document sharing, while providing better transparency and accessibility for potential third-party investors.