Best practices: protecting your trade secrets in the M&A virtual data room

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Those who deal with M&A deals, as a rule, quickly get used to large quantities of data that need to be reviewed. Gigabytes of documents are subjected to systematic scrupulous analysis. Just a decade ago, the transaction process was preceded by a “cult trip” of the buyer’s lawyers to the seller’s office to get familiarized with all the files necessary in the due diligence procedure in a separate room. Technologies have made it possible to speed up the work due to the exchange of electronic versions of documents (the presence of originals still needs to be checked, but this is already easier). This can be done by sending the requested files via email or through cloud storage like Google Drive, iCloud, or Dropbox. The problem with both options is security. It’s unsafe to share important documents simply via email or by throwing a link to Dropbox. In this post, we’ll take a look at a useful technology that addresses these challenges. It’s about virtual data rooms.

What Is VDR?

The Virtual Data Room (VDR) is a highly secure web-based system (Internet storage) where secret and confidential documents and information can be stored and distributed between clients and third parties in order to perform faster and more efficient due diligence. These systems are commonly used during mergers and acquisitions, complex transactions and operations, bankruptcy, reorganization, and borrowing. Accountants, lawyers, managers, government agencies, banks, financial institutions, buyers, and sellers can enter information into the VDR.

Why Do You Need a VDR?

There are many situations when your company needs to share confidential information with various partners. Whatever you are planning – M&A transactions, organizing communications for the board of directors, raising investments in a private fund, developing new medication, or anything else – data room software will help you solve the problem in the most professional and cost-effective way. In any industry and for any business problem, there is always a suitable solution.

Virtual data rooms use a number of very simple things to help your business become faster, safer, and more competitive:

• VDRs use the most modern security technologies. You can be confident in the confidentiality of your information if it is stored in a secure data room.
• The software interface is one of the key strengths of the best data rooms. Users and their partners do not need special training – you can start working with the virtual data room in 5 minutes after familiarization with a step-by-step guide.
• Meeting your needs. Virtual deal room is a flexible and customizable solution that can be integrated with other business applications. You can easily implement your wishes in the solution since most virtual data room providers are interested in improving their main products.

Data Room Services for M&A Transactions

Mergers and acquisitions (M&A) is the most common use of online data room software. These repositories provide a place for the due diligence required during the completion of a transaction. These business deals involve a large number of documents, many of which are confidential and contain secret information. Implementing VDR is a secure and trustworthy medium for all interested parties to upload, view, and share documents during negotiations.

There are two groups of virtual data room due diligence on the market. The 1st group can include the three most famous virtual deal rooms: RR Donnelley, Merrill Datasite, and Intralinks. All three companies have vast experience in the field of M&A, and the solutions they offer are rich in functionality without compromising security. They also give you an opportunity to download and store large amounts of data. The price for their services is rather high, as it’s formed on a per-page basis and charges for additional users. The 2nd group includes the best data room providers like SecureDocs, V-Rooms, and Ansarada. These systems are more user-friendly and relatively inexpensive.

It should be noted that apart from the above, there are no specific differences. Both groups are united by the priority of information security. For instance, they all comply with the “gold standard” for electronic financial transactions – 256-bit SSL encryption – and require multifactor authentication. Some modern VDRs also include an undo process for the document being viewed, which allows the owner to revoke access rights at any time, even if another user has downloaded the document. In addition, there are dynamic watermarks, which can be installed and reflected on each file loaded in the electronic data room. These marks can save information about the download date, project title, and even the name and IP address of the person who downloaded the file.