05, April 2022

The Role of Virtual Data Rooms in M&A Deals

The crucial step in the business development of any big company is to acquire or be acquired by another even larger organization. M&A deals are used to facilitate new products, optimize workflow, and even aid the creation of breakthroughs. 

However, due to the complex nature of the M&A process, there are a lot of documents that need to be created, or presented to both sides of the deal. As such a business venture can change the fate of many workers, in either of the companies there are special laws by which the dealmakers need to abide. 

Combining that with internal regulation of businesses, and company culture, it becomes evident that such a process should be aided with special tools designed for this purpose. A virtual data room is one of them.

What are the ways a secure, online data room can help in M&A deals and the due diligence process?

No physical space

Before the digital age, physical data rooms were used to conclude this type of business venture. People would gather, exchange information, and the process would be stretched over months or even years before it could be finalized. Members of the board from both companies, and their representatives needed to manage their schedules to physically appear somewhere. There were limitations of space, so people involved in the deal also had to be divided into groups, and access the important files one at a time.

This all changes with the help of an online data room. Not only is it equipped with tools that facilitate faster dealmaking, but it also isn’t tied to some remote venue. Everything takes place online, and physical meetings are only optional. With the help of this technology, the files are accessible without having to sacrifice safety. 

They are also secure without having to worry about space maintenance, which is often lackluster in old office buildings and archives. Traditional data rooms are affected by a lot of factors that the digital realm doesn’t have to deal with. Those cramped spaces are no longer an issue with the use of virtual data rooms, which allows for more people to join the deal making process. 

Document management

Various tools can be found in the online data room space that facilitates a faster deal making process. Some of them can be seen as a help in file management. Templates, done-for-you folder structures, and tag systems are all part of the tool that will help manage the sensitive data that has been put into the virtual data room space. Some virtual data rooms even make use of AI software that suggests additional sorting in the case of an unclear construction. 

The interface of the online data room often mimics the one found in common operating systems, which makes transferring data easier for people who do not use that type of technology on a daily basis. 

In most cases, the virtual data room providers include a drag-and-drop functionality to make the M&A process faster, and not have to deal with some elaborate uploading scheme. Selection of files on your physical drive, and uploading them to the secure cloud environment can be accomplished with a couple of clicks, without the risk of confidential documents being exposed. 

Accessibility combined with security

After the files are uploaded into the cloud storage space, they can still be modified and adjusted to everyone’s needs. Through internal security algorithms and bank-grade encryption, the documents held in the virtual data room are in an almost impenetrable file repository, much safer than data held in a physical data room, and even more secure than the document storage held in the company’s headquarters. Apart from the listed security features, you gain security controls over who enters the cloud solution.

This safety doesn’t impact the accessibility of the files, as it can be decided by the administrator of the space. They can give permission to people to access those files, as well as revoke any rights in the interface of the online data room.

Necessary personnel can be put into permission groups to work on the selected documents, while third parties and people important to the M&A deal can have individual access to the crucial for the deal files. This helps with data security, breaches of confidentiality, and a more successful and productive dealmaking and due diligence process. 

Collaboration-enabling tools

The people who are given access to the virtual data room space can also benefit from the comment and annotation functionality. If one of the sides of the deal finds some incongruence of information or something missing from the documents, they can leave a comment, and let the responsible people know that there is some mistake or misunderstanding in the files. 

The people connected to those documents get a notification and can get straight to answering the questions or modifying the content. Simple correction can be done within the virtual data room itself, and making those changes is much more proficient in a virtual environment than it has ever been in a physical setting.

Problem-solving is done much more swiftly, and some issues can be solved within a couple of hours of letting people know. This wasn’t possible with documentation on paper, as it always involved another printing process and the destruction of earlier sensitive documents.

It also gives people a better understanding of what kinds of files are being accessed, and what kind of data is necessary for the other party. This commenting and addressing process gives an insight into the important data points individual users on the other side are after and can be used as a bargaining chip in the later parts of the deal. User activity monitoring is now possible thanks to the help of the virtual data room tool.


The process of adding data to online data rooms is also aided by internal chat functionality and integration with other apps that the company uses. Through constant communication and being able to reach out to people responsible for certain documents, it is much easier to clear up any misunderstandings, be it internal or external.

This functionality helps to keep tabs on what has already been done, and what still needs to be worked on, as during an M&A deal there are a lot of moving parts that need constant attention from both sides and coming to a final conclusion takes a lot of communication. This is why providers of virtual data rooms enable integration of chats and e-mail notifications if something is updated, or goes terribly wrong in that space. 

Those are just some of the many functionalities a virtual data room offers for people involved in an M&A deal. Physical data rooms would never be able to address so many needs at once. This deal making process is often a stressful, and complicated process, but there are four stages of that transaction that can be aided by a virtual data room. 

Stages of the M&A transaction


  • Document access. Before any talks about a possible M&A transaction even take place, the company leaders need to know where their documentation is stored, and in what form factor it is. Due to the digitalization of most of the deals around the globe, if the sensitive documents are in paper form, they will need to be turned into digital files. 
  • Document upload process. After the process of digitalization is complete, those documents can be put into the virtual data room and sorted into a structure that would be the easiest to access for everyone involved in the deal making process. Following a folder tree, and a tag system that is understandable leads to easier navigation in the virtual data room. 
  • File adjustments. After the files have been placed in the filing system, they can be adjusted to the needs of the deal. Some can be enriched by additional data inside of M&A virtual data rooms, while others might be simplified due to overcomplication of some reports, or just plain unimportance of additional data.
  • Final check. Those documents should also be double-checked before anyone else is able to look through them. Reading through the files, and seeing if everything is prepared before the deal making begins is almost the last step in the preparation stage. 
  • Permission rights. If you are sure that you made every possible effort to make sure that the documents are the most optimized for deal-making as they can be, this is the time when you can invite the third party to see those sensitive data points and files in the M&A data room that will influence their decision over an M&A transaction. 


  • Mapping the content. The interested party should be able to easily navigate through the folder structure. If not, you can always explain to them the naming conventions, and how it has all been organized. The file structure is supposed to support exploration, and this is why using virtual data rooms for mergers and acquisitions templates might be a possible solution.
  • Showing the past. Using the virtual data room interface, navigate through files that illustrate the humble beginning of the company, and how it was slowly growing into prominence. Present setbacks, and solutions to problems that the business had along the way, while also showing what kind of support was the company able to amass. Visualize the growth by proxy of tangible data points, comparing the previous years to the current state. 
  • Illustrating the present. The current situation of the company plays a huge role in business dealings. A virtual data room can store all of the patent rights, and necessary deeds the company has, alongside documentation of assets. Thus, it is immediately evident what comes with the company if someone would like to incorporate it into another business. 
  • Talking about the future. You can also fill online data rooms with prognosis material. This will show how the company would profit if it was a standalone business. The number of profits it would make, the number of new inventions, and many other data points that could be helpful in swaying the decision of the other party. Using data from the past and present might not give a 100% accurate picture of the future, but can be a useful negotiation tool.

Due diligence 

  • Addressing the comments. The second side of the deal might have some issues with the documents, and they can address them in the comment section of the files. After they have voiced their opinions, the team on your side can start clarifying the data for the sake of the potential transaction. The easier the documentation is to read, the more swiftly will the whole process be concluded, and by using an M&A dataroom, accessibility to that kind of functionality is no longer a problem.
  • Adding new documentation. If the dealmakers are missing some documents from within the virtual data room, your team should also add those files into the virtual data room. Each new addition will give the interested party a notification, which means that they won’t miss out on the updates inside of the online file repository. 
  • Overseeing the process. The whole process can also be followed by both sides of the deal. Multiple users with appropriate permission settings can see all the changes happening inside of the virtual data room in real-time. They might also have the ability to chat to the people who are making the changes to even simplify the process without breaking the workflow of the company. Physical data rooms don’t allow for that kind of control.
  • Communicating ideas and finishing up the documentation. Addressing every query, and adding every additional document for the due diligence process might be a time-consuming process, but thanks to the tools found inside of the virtual data room that enable communication and collaboration, it is a much easier and faster way of concluding business and getting to the end of an M&A transaction.


  • One last look. Both of the companies take one last look at the documentation inside of the virtual data room, and finalize their dealings. At this point, confidential documents should already be sorted, and ready for both of the companies to join their forces. There should be a clear plan of action, a division of labor between employees of both sides of the deal, and a mutual understanding of what can be achieved while working together on projects that might revolutionize the future of an industry.
  • Deal finished. Concluding the transaction might take a couple of weeks or even months, but the back and forth between the two parties is enhanced through the use of a virtual data room. This way, both of those parties do not have to physically meet before the deal is concluded and oversee the necessary financial transactions. They can manage their operations remotely, while still retaining the same level of operational competence, as in a physical environment.

How to choose a virtual data room vendor that best fits you

As illustrated above, an M&A transaction is a multilevel operation. Going through those four steps might be difficult without the help of virtual data room solutions, but choosing one that doesn’t fit your needs might result in additional complications. 

So, how to pick a software solution that will accelerate dealmaking and not hinder that process? How to find quality M&A data room providers?

1. Know the needs of your business

Before you venture into the market to look for the best data rooms for M&A, you need to first understand what those needs are. Look around your business, and check how sensitive file management was done in the past, and if there was an M&A deal that the company was already partially involved in. 

If you have access to such data, this will be a much easier process for your company. Finding out the needs your business has is the first step to finding the perfect virtual data room for your upcoming M&A deal, and just simple file storage. Features like machine learning are just additions to the core experience of a virtual data room. 

2. Match the capabilities of your team

Knowing people in your company helps you not only in optimizing the workflow but might be instrumental in picking a virtual data room solution that will match their technological proficiency. 

Questions connected to the usability of the software, and user-friendliness of the interface might arise, and this will also provide you with additional bits of information that will make your choice a little easier. Talking with the crucial people in your business should provide you with enough actionable feedback to move onto the next step. 

3. See what is available on the market

Combining the data taken from the usual file organization practices and feedback from your team will help you figure out what kind of data room you are looking for on the market. There are many solutions available, and some of them even specialize in M&A deals and due diligence, so taking into account everything you have earlier researched will be helpful in deciding what kind of solution you are looking for. Make a list of potential candidates that are cost-efficient and fit your budget, and move on to the next step. 

4. Collect opinions about the providers

If you have chosen some of the virtual data rooms that you deem fit to represent your company online, you should look at what the other users are saying. Data room providers M&A have been already tested and rated by clients worldwide. Search for opinions about the software solution, look for possible issues and hindrances someone might have encountered while using the virtual data room, and see what those secure data rooms really excel in. 

Virtual data rooms offer a lot of value for a subscription, and testimonials of happy clients give you that additional assurance. Users giving reviews for those tools will be another factor that might steer you in the right direction when it comes to picking the solution for you.

5. Pick the few that are left

After going through such a rigorous process of deciding which tool will be the best for your business, you should be left with only a couple of choices. Those are the only virtual data rooms that are both fit for your business and your coworkers, and also have praise from people online. Out of all of the available file repositories online, those are the ones that are almost tailor-made for your company. It is time to put the features that the data room vendors promise to a test.

6. Use the free trial

Most virtual data room providers offer a trial period where you can test out all of the functionality the vendor has mentioned on their sales page. Vendors know that interested buyers would like to see how the tool performs. 

As a potential customer, you can use all of the capabilities a data room like this might offer, and beta tests its functionality on a micro-scale at your company. This is the true test of the tool, and you will also gather additional data about how people are using the features of the online file repository. If the solution is everything you wished for, you can talk business with the provider. If not, you can slowly offboard, with no strings attached. 

Following all of those steps should result in picking a solution that will fit your business needs, and aid possible future M&A deals, and the due diligence process that follows. You might also question the virtual data room provider and negotiate a special package for your needs!

Going through the many steps ensures dialing in on what your company really requires, and swift incorporation into already established business structures.

Data room M&A conclusion

Virtual data rooms are tools used in businesses worldwide. The industry standard physical data room is being replaced in the context of M&A deals and due diligence. This kind of dealmaking is already present in the digital space, and thanks to the digitization of files in companies, we are no longer bound by geolocation or the vision of a physical data room.

Mergers can be done from any place in the world, and by using a specialized tool for file safety and accessibility like virtual data rooms, this process is done much quicker and can result in both time and cost savings. Follow our steps in picking the right solution for your company, and you will join thousands of businesses that already utilize virtual data rooms in their deal making processes.