Data security plays an important role. Companies are doing the right thing by investing in security firmware and digitally testing all data-related devices during the M&A processes. Check why it is important to move to the virtual data room to accelerate the M&A process in the article below.
M&A process and its main motives
Any project, especially one as complex as an M&A deal involving many parties, requires preliminary preparation and development. And high-quality preparation of the agreement takes time. In order to close the deal on the most favorable terms for both parties, it is important to analyze the market, and conduct a comprehensive audit of the target company, sometimes with the involvement of external consultants, and assess and work out possible risks. Only the preparatory stage takes several months, and the agreement itself can take from half a year to a year. Not understanding the real terms for concluding a deal can play a bad joke on the seller.
A company merger or acquisition involves the purchase by one organization of the business of another. The buyer must acquire at least 51% of the target company’s shares in order to gain full control over it. This is usually between two companies, with the financially stronger entity buying the smaller one. Unlike a merger, when acquiring a company abroad, the takeover decision does not necessarily have to be joint. There are so-called hostile takeovers when one company takes over the operations of another firm without the latter’s consent.
The main motives of M&A are:
- obtaining a synergistic economic effect from the merger;
- increasing economic potential in a competitive environment;
- improving the quality of company management;
- pursuit of fiscal goals;
- financial and organizational benefits from the purchase of undervalued assets;
- absorption of competitors;
- diversification of production; personal motives of managers;
- image motifs.
However, the most important reason for M&A is still the desire to obtain and strengthen the synergistic economic effect that determines the growth of the company’s competitiveness. Because of these benefits, organizations around the world today often rely on VDRs for tasks such as due diligence, M&A, contract negotiation, and IPOs.
How can the virtual data room accelerate the M&A process?
It is worth saying that vdr providers have already managed to gain success in the European and American markets while M&A deals. Leading enterprises have already signed a significant number of contracts thanks to virtual data rooms. And one of the components of success is security. Servers on which documents are stored are well protected from unauthorized access. Also, the servers are equipped with unique security protocols that are given during cataclysms. All workers must pass a three-level authentication before entering the building, which has security cameras and security.
The most reliable data room providers are the best way to accelerate the M&A process because they help to perform thorough pre-investment due diligence, covering financial issues, strategic planning, operational processes, and deal-making, and ensure the integrity of letters of intent, sales agreements, and affiliation agreements. Tax support helps determine efficiency and strengthen the organization’s position in negotiations. Thorough pre-investment due diligence and risk assessment help to alleviate lenders’ concerns about risks in today’s changing deal-making environment.