How to Select a Data Room for Your M&A Deal?

Despite the difficult period of COVID restrictions, the mergers and acquisitions (M&A) market feels better. Thus, how to select a data room or your M&A?

How to Conclude an M&A Deal and What to Require from the Data Room?

The main drivers of transactions in a crisis are either the need to get rid of non-core assets or the desire to buy cheaply a company that is experiencing financial difficulties. As a rule, at the stage of preliminary negotiations of M&A, only business issues of the upcoming transaction are discussed, and the help of lawyers is often neglected. However, often the negotiation experience of data room providers gained in previous transactions can save a significant amount of time and effort when discussing not only legal issues.

The M&A market is rapidly changing: due to the economic, political, and epidemiological situation, the emphasis in many industries has shifted from the international level to the domestic one. Large vertically integrated holdings and state corporations are also extremely active, especially in the markets that the government has taken on structuring. The dynamics of the development of various industries are different: we see one picture in the IT market, and a completely different one in the field of heavy industry or mining.

At a minimum, the following support should be expected from the virtual data room provider during the pre-negotiation stage:

  • Proposal of the most profitable transaction parameters;

  • Proposal of various transaction structures that will take into account the interests of both parties;

  • Assistance with the definition of the zone of possible agreements on essential terms.

Consider the Laws of the Market While Selecting the VDR for M&A

In the M&A market, like in any other, there is supply and demand. A strong and promising business attracts many buyers. Fading and problematic – it may go bankrupt, and its assets will be taken apart by competitors on the cheap. Such an enterprise can be autonomous companies that are part of a corporation or concern, a geographically distributed, temporary association of enterprises working on joint projects, etc. Among the main reasons why companies consider using the virtual data room for M&A deals are:

  • Raising additional capital for business development.

  • Partially record the result of your work.

  • Attract an experienced partner to the business.

  • Entering new markets through the sale of a share to a foreign partner.

  • Record the valuation of the business.

It is more difficult to assess who won or lost from an M&A transaction (that is, sold too cheap or overpaid) than, for example, in the stock market. This is a complex and lengthy process with large sums at stake. Successful players in the M&A market know its rules: they do not hope for immediate results and make informed decisions. The data room for M&A in can help build and strengthen relationships and collaboration within the department. It takes a lot of managerial experience to work with sales, operations, and management/ownership to show how the accounting and finance function can help everyone work better together.

Follow the next five steps to select the best data room for your M&A deals:

  1. Define your needs and abilities.

  2. Identify desired features.

  3. Consider your budget.

  4. Compare virtual data rooms.

  5. Read the reviews.

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