Do you know that almost 10% of major business acquisitions and mergers are canceled every year? 10%, in this context, is not a small figure by any means. But why do these business deals fail at all?
There are several reasons, such as sellers hiding confidential data from buyers, incompetency in management, and lack of communication. Apart from that, when these are cross-border transactions, the cost of such deals increases significantly.
That is why enterprises and corporations are turning to online routes, such as data room software, to manage complex business transactions, including acquisitions and mergers. In fact, businesses have been using data rooms for mergers and acquisitions for over a decade now.
What is a virtual data room, and how can it help in making business deals?
What Is a Data Room?
An electronic data room, commonly known as a data room, is a digital data storage platform for storing corporate, professional, or business-related documents. A secure VDR allows businesses and professionals to safely store their business documents online and retrieve them whenever they want.
Also, virtual data rooms can be used by multiple users at a time. In other words, data rooms can be converted into online workspaces where business employees can collaborate. VDR software is more beneficial for businesses operating in multiple locations. Such businesses can maintain a centralized data repository, and the employees from different branches can coordinate remotely.
Lastly, online data room software has been used by firms, private equities, enterprises, and corporations for the execution of business deals. Examples may include mergers, acquisitions, capital investments, fundraising, joint ventures, initial public offerings, etc.
So why do businesses use secure VDR software for major transactions? Here is why.
5 Reasons Why Businesses Use Online Data Room for Major Deals
1. Central Data Storage
Imagine a mega enterprise with multiple business units or subsidiaries located in different cities or states. Even if the company prepares consolidated financial statements, it is highly possible that other types of records are maintained separately. In simple words, the data is dispersed in different locations. Besides, potential buyers can ask for separate records of every business unit or franchise.
In such circumstances, a central data storage system is the best option. For example, such an organization can use data room software and create a central document management system. Every unit can maintain its records in the same data room.
But how does it help in business deals? It is simple to understand that when all the records are maintained in one place, it becomes easier for potential buyers to access data.
2. Remote Access
Remote accessibility is one of the biggest advantages of using virtual data rooms, especially during business deals. Before data rooms became common, project management teams in transactions like M&As used to visit company premises for due diligence (or thorough document verification and analysis). That process could consume weeks or even months, depending on the size of the organization.
Data rooms have just put these things out of the equation. As VDRs are cloud-based, centralized data repositories, they can be accessed from anywhere, anytime, with any commonly used device. Yes, you can access an electronic data room from your mobile, tablet, or laptop. The best part? Documents in modern data rooms are accessible without the internet.
3. Data Security
As we mentioned earlier, sellers hiding confidential business data from buyers is a major reason for failed business deals. But why do they do that? Data security is a major concern for modern-day sellers because if the deal is not closed, the company’s highly sensitive data, such as product designs, prototypes, trade secrets, etc., can be stolen or misused.
This is where virtual data rooms have been phenomenal. That’s because data rooms provide you with unparalleled data security and control over data flow. The data room administration can decide who will be allowed to access particular files, folders, documents, or even pages in documents.
The administration can also revoke access whenever needed. Apart from that, VDR management can prevent unauthorized editing or download of important documents. That’s not it; a document can be protected from being photographed, scanned, or screenshot.
4. Real-time Communication
When it comes to communication between buyers and sellers in business deals, a secure VDR can offer so many options. Virtual data rooms facilitate individual and group communication. For example, data rooms allow private or one-to-one chats, group conversations, and general posting and comments.
Furthermore, users can engage in live Q&A sessions, create polls, annotate documents to ask questions for ambiguities, and conduct online audio or video meetings.
5. Cost-effectiveness
Where data security and easy access are important elements, it is important to look for cost-effective options. Maintaining physical data rooms can cost you thousands or tens of thousands yearly. Studies revealed that an average company in the US spends $400,000/annum on expenses like paper costs, printers, folders, printing ink, document covers, document compilation expenses, courier charges, etc.
With virtual data room software, you can reduce that cost by up to 80%. The best part? Even the most expensive virtual data room vendor won’t cost you $400,000 per year.
Final Words
Data security remains the biggest concern for businesses in large-scale deals. Then comes the lack of communication and inability to access business data easily. These three factors ultimately become major reasons for failed business deals. A virtual data room helps businesses to counter all these problems effectively and economically.
Click here virtualdata-rooms.com to read more about virtual data rooms.
