22 March, 2023

If investment bankers are the intermediaries for large-scale business transactions, then a virtual data room (VDR) is the neutral ground on which they can mediate. A virtual data room, sometimes referred to as a virtual deal room, is a secure online platform where investment bankers and their teams of experts gather documents, collaborate on valuation analytics, and develop a terms sheet. When the time is right, the bankers can invite investors and other parties into the password-protected virtual deal room.

Employing a virtual data room can help minimize surprises and promote a smooth transaction. ShareVault has been the VDR provider for more than $50 billion in large-scale business transactions, and provides software features and tools that accelerate the due diligence process. This article provides information on best practices for a VDR.

Virtual Data Room Software Basics

Virtual deal rooms are used widely by investment bankers to facilitate financial transactions. The parties involved may be investors or two corporations engaging in a merger or acquisition. Data rooms can also be used if one business wishes to go before multiple prospective buyers in a bidding war. In each of these transactions, the documents shared mainly pertain to the due diligence process.

The due diligence process involves amassing troves of documents that typically include:

  • Financial annual reports, tax filings, profit and loss statements, the general ledger, accounts payable statements, a schedule of the latest accounts receivable, names of board members and shareholders, an organizational chart, and articles of incorporation and bylaws
  • Partnership agreements, including vendor and supplier contracts
  • Inventory of physical assets, including real estate, manufacturing equipment, office equipment and supplies, inventory, and raw materials
  • Descriptions of the company’s status within its industry
  • Projected opportunities for growth and an assessment of market and legal risks

The majority of due diligence documents are highly confidential - which is why the bank-grade security of a virtual data room is so important. Only authorized users can enter the protected VDR environment, and even authorized users can have limitations on which documents can be viewed and what actions are permitted with them.

Populating Documentation

The investment bank VDR administrator plays a vital role in organizing the VDR setup. He or she creates the master folders and populates them with the relevant files. He or she then invites users, assigning each a unique password.

ShareVault makes these organizing chores easy with its Due Diligence Checklist, built-in software that automatically sets up and numbers folders and makes it easy to invite users and set user document permissions. Additional helpful tools include bulk uploading and integration with popular file sharing apps like DropBox, Box, Google Drive, and Microsoft SharePoint & OneDrive.

Creating Secure Environments

A ShareVault virtual data room is a fully-protected environment:

  • Each user’s IP address is recorded and verified with each use
  • Users are assigned a password with two-step verification
  • All documents are encrypted: Files at rest are encrypted with AES-256, and files in transit are via HTTPS over Secure Sockets Layer (SSL) with AES-256 encryption
  • ShareVault’s permissioning protocols can limit a user access to certain documents, and policies can be defined to prevent the user’s ability to copy/paste, print, download or create screenshots
  • The investment bank VDR administrator can apply a dynamic watermark to a document, or remotely shred any document, even one that has been downloaded

Late Stage Management

The investment bank team may allow access to a limited number of documents during the initial review stages, and then increase document access once a potential partner or investor has expressed suitable interest. These potential investors will go through the same user authorization protocols to ensure their participation is protected. Investors can then review the provided documents and negotiate terms and values based on their contents.

As the deal nears completion, the investment bank VDR administrator can provide a detailed audit of all documents and their user access history. That same audit trail is typically used in the regulatory review process.

Virtual Data Room Benefits

A virtual data room offers significant advantages over a physical data room: multiple users from different parties can review documents without making copies, even users in remote locations. These VDR features allow easy access without creating privacy or security risks. Beyond the advanced security they offer, virtual data rooms also make document sharing easy in an increasingly digital business environment. Many important documents are already maintained digitally. Instead of needing to print and track these documents for physical sharing, they can be shared with a few clicks online.

While the due diligence process is time-consuming, its detailed, data-driven evaluation of a company’s strengths and performance will improve an investment bank’s chances for building investor confidence and delivering a successful outcome.

Find Security with ShareVault!

If you anticipate a merger, acquisition, or exit in your company’s future, engaging a virtual data room and investment banker may help you through the process. ShareVault is the most feature-complete virtual data room solution available, with advanced built-in tools and features that speed up your key business processes while keeping your confidential data and documents secure.

Contact us today to learn more about ShareVault software and how your investment bank can use it to secure your next deal!