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Benefits of a Virtual Data Room for Private Equity Deals


Private equity firms are a growing and a popular form of investment for many high net worth individuals and institutions. Managers of private equity firms understand the importance of sourcing and closing lucrative deals. Of course, in addition to finding deals that will yield generous returns, managers must diligently supervise the firm’s portfolio, sometimes even providing services and advice to the companies in which it has invested to help achieve maximum profits.

With all of these investments to locate, close, and subsequently oversee, it is imperative for private equity firms to have an organized document management system. A virtual data room can help private equity firms stay on top of their management responsibilities. Utilizing a secure data room facilitates the deal process from beginning to end. And, by selecting a solution that emphasizes security, sensitive information will be stored safely. But, private equity firms aren’t the only ones that benefit from a data room. The companies seeking capital should consider using one as well. Here are a few ways private equity deals will benefit from the use of a secure deal room solution.

Sourcing Deals

Depending on the relationships a private equity firm has with other financial services and investment professionals, information about companies seeking capital may be routinely directed to them. In other cases, firms may have to seek out deals on their own. In either scenario, firms will want concrete information regarding the prospective candidates, including detailed organizational and financial documents. By setting up a deal room, firms can upload any received documentation and determine who will need to review which pieces. This can be accomplished by creating permissions-based roles, as well as folder and subfolder creation for different types of documents and different deals.

For those companies or ventures that are seeking capital from a private equity firm, it can also be beneficial to establish a data room. Information about the company such as the business model and plan, financial statements, and leadership biographies can all be housed in the data room and shared with prospective investors as appropriate.

Managing and Closing Transactions

Once a private equity firm finds a deal it intends to pursue, or a capital seeker finds an investor it hopes to woo, a deal room can be used to facilitate the entire closing of the transaction, particularly the requisite due diligence process. Confidential information such as intellectual property, asset portfolios, and client lists, among the many other sensitive documents, can be safely stored in the deal room, allowing both parties to access the information it needs in a secure manner. Hopefully, the easy flow of information between the parties will enable the deal to close quickly and seamlessly.

However, if the deal happens to fall through for whatever reason, permissions can be changed and access even revoked to protect uploaded data. Plus, with watermarking, disabled printing, audit trails, and other built-in security features, the deal room administrator can ensure that important data is protected. 

Monitoring Investments

Finding and closing deals can certainly seem like an arduous process, but monitoring investments to ensure adequate performance is obviously an even more important feat. Private equity firms may need to become actively involved in its portfolio companies’ management processes to make certain that the companies succeed and will prove to be worthwhile investments. A virtual deal room will allow the management teams on both sides of a transaction to continue to collaborate and share information in a highly secure fashion.

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