Virtual data rooms (VDRs) are an invaluable tool for companies, investors and other entities to securely store and share the vast amounts of documentation involved in mergers and acquisitions corporate development. Typically used during the due diligence stage of a deal, VDRs offer many advantages, including enabling multiple people to access data simultaneously and securely; virtually eliminating the risk of documents being lost or accidentally destroyed; and disabling copying, printing and forwarding to ensure confidentiality.
But while VDRs have improved the security, efficiency and transparency of managing large volumes of sensitive information, they alone cannot take your corporate development practice to the next level. That’s because their effectiveness depends in large measure on how well they are integrated into other elements of your dealmaking process.
If your VDR is not integrated into your end-to-end inorganic growth tools, your team may be losing a lot in the way of efficiency. Deploying a VDR that works seamlessly in a corporate development cloud — where every piece of data lives in one place — eliminates siloed teams and disjointed communications that have long plagued deal flow. This is particularly true if your deal team is fairly green or stretched thin, where relying on a secure document management tool that is separate from your main work management platform can be a major stumbling block.
Where Traditional Stand-Alone VDRs Fall Short
Despite what many VDR companies would have you believe, a virtual data room is not M&A software. Unlike Midaxo Cloud with its included VDR, stand-alone virtual data rooms obviously lack features designed to enhance the deal process and elevate the quality and efficiency of each stage of the deal lifecycle. Among the shortfalls of standalone VDRs are:
- Lack of process management tools – While most VDRs offer document tracking, indexing, and search functions that increase efficiency and transparency, they lack critical process management tools that can assist in realizing the full value of a deal.
- Limited benefit in due diligence – Storing and reviewing documents during due diligence are key benefits of virtual data rooms, but stand-alone VDRs lack real-time analytics, progress reports, and editable playbooks, among other features, to enable due diligence teams to operate at the highest level.
- Negligible impact on post-merger integration – Many VDRs do not allow practitioners to flag key items for integration planning. Since traditional, standalone VDRs are often shut down by practitioners after due diligence, the opportunity to communicate and build on the information can be too easily lost or forgotten. A corporate development cloud, with its everything-in-one-place approach for the entire deal process, safeguards against this. Features — such as the ability to flag critical information for integration — are invaluable because they provide a bird’s-eye view of the entire deal process and a methodical workflow.
How a Cloud for Corporate Development with Integrated Document Management Powers Better Deal Workflow
Whether you are a mid-market acquirer with small deal teams or a Fortune 500 company well-versed in dealmaking, an end-to-end work management solution with included document management offers many benefits. Here are some notable ones:
- Full pipeline setup — This not only simplifies the entire process management for deal teams, but it also allows for one tool to be leveraged to track all deals. Oftentimes, a VDR is used for diligence, then the information is extracted and practitioners revert to using a variety of tools and/or platforms. That brings more complexity to an already complex and often chaotic process. A corporate development cloud sets your teams up for success before, during and after due diligence.
- Target scoring — At the beginning of the deal lifecycle, M&A software will help with target monitoring and scoring.
- Real-time analytics & robust data integration — With one source of truth for your entire pipeline, real-time analytics can provide deep insights.
- Click-of-a-button reporting — A key benefit of M&A software is its simple reporting structure, which has the ability to produce one-pagers at the click of a button in order to easily communicate key information.
- Increased consistency — M&A software creates a seamless, organized, transparent and informed M&A process from one deal stage to the next.
- Live KPI tracking — Comprehensive software allows you to track financial and operational performance at the initiative, workstream or overall program level. One platform, one place for everything.
A complete and purpose-built work management software platform for corporate development can save time by leveraging one solution for the entire deal process instead of requiring movement back and forth between Excel, emails and a VDR.
Two Types of VDRs
There are two major types of deal rooms — buy-side VDRs and sell-side VDRs — each with their own unique features and benefits. Buy-side VDRs are designed to help companies that are in the process of acquiring another business, real estate, or intellectual property by offering features like document control, data encryption and secure access for authorized personnel. They may also provide document search and comparison, audit trails and reporting tool features. Purpose-built solutions like Midaxo Cloud handle document management like a standalone VDR, while also including project management capabilities to manage the review process and advanced automation for inputting, categorizing and suggesting next best actions for each document.
Sell-side VDRs, on the other hand, are designed for companies in the process of raising funding or selling a part or all of their business. They provide a secure platform to store and share important documents related to the sale process, such as product information, product specifications and price lists. Sell-side VDRs may include features such as data encryption, document control and secure access for authorized personnel. They may also provide capabilities such as document search and comparisons, audit trails and reporting tools. Buy-Side VDRs enable M&A teams to manage multiple due diligence processes in parallel, standardize the review process, assign review tasks and report progress.
Final Thoughts and Further Reading
As you shop for effective tools to elevate your corporate development activities, don’t be fooled by VDRs claiming to do more than store and organize documents. Remember, software for M&A and corporate development includes more than a VDR. In our increasingly remote and virtual world, investigating and choosing the right end-to-end work management platform for your deals is more important than ever. To learn more about Midaxo Cloud with integrated document management and how it can benefit your corporate development practice, please visit our product page or download our Due Diligence Guide.