How To Choose Data Room Software For M&A Risk Management?

An integrated risk management approach during M&A transactions helps managers make better decisions. A virtual data room will help to make this procedure secure and transparent. So, what is it and how does it work?

What is M&A risk management? 

The high popularity of mergers and acquisitions (M&A) has led many companies to force a deal without taking into account important factors in the deal process and acquiring assets whose integration is unsuccessful. This situation is connected with the unjustifiably dismissive attitude of the company’s management to the issues of risk management in transactions of this kind. The lack of practice of identifying, assessing, minimizing, and constantly monitoring risks leads to the fact that many companies carry out a merger, which carries a large number of risks. Only a few companies use this methodology when planning M&A transactions, which can prevent and reduce the impact of most of the factors that negatively affect the integration of companies.

In most cases, before concluding the transaction, the buyer performs due diligence procedures for a potential investment object. The basis of the due diligence algorithm is the identification and assessment of risks that a potential buyer may face when acquiring an investment object.

Virtual data room for risk management optimization

A large amount of information and business documents are processed during the due diligence procedure. Therefore, most audit procedures are organized today in the digital data room. (VDR) is a system for the operational deal management of a company that provides electronic document management, control over the execution of transactions, project management, and interaction with customers. In other words, it is a digital platform with a wide range of options for managing business processes and the collaboration of employees. The system effectively solves problems both within a small structure and within a geographically distributed organization with a complex scheme of information flows.

The software offers the following services during organizing due diligence:

  • negotiation of contracts;
  • electronic archives;
  • stream document processing;
  • legally significant document flow;
  • distributed workflow;
  • confidential document flow;
  • secure collaborative environment.

So, with VDR, you get a state-of-the-art enterprise-grade platform with the highest levels of reliability and performance.

Tips on how to choose a VDR provider

The right choice of VDR is the key to quick and effective implementation. The product line is a very large range of data room vendors, focused on all kinds of businesses, so it can be difficult to navigate the full range of solutions on your own. Thus, there are the following aspects that should be considered:

  • scalability – both in terms of the number of connected jobs and the number of documents contained in the data room;
  • cross-platform – compatibility with various operating systems, and software;
  • wide functionality;
  • speed – response time no more than 3 seconds;
  • system flexibility – easy adaptation to specific processes;
  • integration with other accounting systems and other third-party applications;
  • convenient tools for self-configuring the system;
  • availability of a fully functional mobile application;
  • intuitive interface;
  • security – secure data repository and safe collaboration are the main data room functions;
  • price – different data room vendors offer several plans; you can also try a free trial version.

The project of introducing an electronic document management system can take from several weeks to several months. It all depends on what processes need to be automated and whether it is possible to do this on a “boxed” solution without implementing unique business processes