When you’re conducting enterprise-level deals, such as a merger or acquisition (M&A), you need to make sure that all confidential documents you need to share with interested parties are protected. It’s one thing for business owners to agree to an M&A transaction at the surface level, but attorneys, investment banks, financial advisors, and other third parties will have to review all documents regarding the deal as part of the due diligence process. Gone are the days of pulling folders of confidential information from physical data rooms. Today, so many deals are done remotely, and even if they aren’t, they need to be done quickly. This is why you need a secure virtual data room (VDR), also known as a deal room, to complete complex financial transactions and legal deals.
The function of a data room for due diligence is to ensure that all team members involved in an M&A deal get the required sensitive documents they need while keeping your documents from falling into the wrong hands. Buyers will need to see things like financial statements and legal documents to ensure the deal is in their best interests, but you can’t rely on traditional file-sharing options like Google Drive and Dropbox for enterprise deals. You need a trustworthy enterprise solution to ensure the confidentiality of required documents. Here are just a few reasons why a due diligence data room is a must.
Built-In Digital Rights Management
You’re likely familiar with digital rights management (DRM) as a way for creators to protect their intellectual property from unauthorized access and distribution, but it’s also becoming a standard for document security. The best virtual data room providers use DRM to protect your corporate documents with encryption, a feature that you won’t get if you make the mistake of using traditional file-sharing options.
When you’re conducting an M&A, you’ll likely need to share thousands of pages of necessary documents with different team members. Naturally, you don’t want every person involved to receive every document. Attorneys should see legal documents, accountants should see financial documents, etc. With the right VDR provider, it’s easy to create user groups and customize their levels of access.
All you have to do is upload your documents to the platform, set your user permissions, and click “enable DRM” to secure your documents and ensure that they’re only shared with the right people. You can set read-only access or give certain users permission to download or edit documents as well. You can even set up your own security features, like two-factor authentication if you’re interested.
There are times when deal room users will need to make comments or notes on due diligence documents, and with the best platform, users will be able to do all of this within the platform itself. If you can avoid having your sensitive data downloaded, you immediately avoid any potential security risks. This also speeds up due diligence, since users won’t have to leave the platform to make changes to documents.
Of course, if certain users do have the need to download specific documents, you’ll be able to rescind their access once the due diligence process is done. Even if your document is downloaded on their devices, they’ll no longer be able to access it.
Real-Time Document Tracking
On the topic of speeding up due diligence, the best virtual data rooms also give you the ability to track when documents have been accessed, edited, or downloaded. This gives you an easy way to gauge interest levels for different projects, and it will also clue you in when a user is struggling with their documents. You can then direct that user to the parts that need the most attention to keep the M&A moving.
A data room is simply a must for proper due diligence in order to protect your most sensitive information and ensure that deals get done in a timely manner.