A virtual dataroom for mergers and purchases can streamline due diligence. It can eliminate document photocopying and indexing, and some of the travel expenses that come with physical rooms. It also makes information more accessible by offering keyword search capabilities. It can also permit bidders to conduct due diligence from anywhere in the world.
A VDR provides the capability to control access for users and provide an audit trail of activities, which helps companies meet the requirements of regulatory agencies. A company can, for example, restrict access to specific folders. For instance, a folder that contains details of employee contracts. The information is only accessible to senior management and HR. This is important because it helps prevent accidental disclosures of private information, which could ruin a deal, or result in a lawsuit, says Ross.
VDRs can also lower the risk of data breaches. This is among M&A participants’ biggest concerns. According to a 2014 study by IBM Human error is the main cause of data breaches in 85 percent of the cases. A virtual data room can help reduce the risk of a data breach by encrypting data and implementing various cybersecurity techniques, such as multiple firewalls and two-factor authentication.
It’s a good idea to draw up the way you imagine a VDR structure prior to beginning the M&A process. This can be as simple a rough sketch in the form of a piece of paper, or as precise a diagram created with graphics editing software.
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