Virtual data rooms are tools for buyers too

NEW YORK, NY, September 14, 2010

Years ago the idea of using a virtual data room (VDR) seemed like it would never be accepted. The concept of taking paper due diligence materials and placing them 'online' seemed too far fetched to work. People felt the internet would never have the level of security or the speed required to display sensitive corporate information to outside parties. Once internet connection speeds increased and security measures improved so did the idea of people reviewing information on a computer screen from the comfort of their own office. Today, VDR awareness is still growing and the adoption rate continues to move further downstream from Fortune 500 companies to middle market companies. Additionally, VDRs were primarily viewed as tools for divesting assets by auction. Today the use of virtual data rooms has expanded to acquirers in two party (one buyer, one seller) transactions.

As deal flow returns, many companies will look to grow within their space by add-on or bolt-on acquisitions and as a part of their process they include a virtual data room to help reduce expenses, add a level of security, prove disclosure, reduce transaction time and provide a better experience for both parties. One M&A industry professional in the bio-pharmaceutical field they stated that, "using virtual data rooms as an acquirer in conjunction with the face-to-face meetings keeps the team busy working at our office and allows us to facilitate negotiations in person".

In one-on-one transactions, more buyers are taking the lead to set up and pay for third-party virtual data rooms. After a target is identified the buyer typically issues the seller a due diligence request list. At this stage many first time sellers do not have advisers or the resources to efficiently handle the preparation and oversight of the diligence materials during the transaction. Even though buyers used to be reluctant to make suggestions to a target on how to effectively handle this process they are now more willing to present the option of a virtual data room, even if they are the ones picking up the cost.

By supplying the seller with a virtual data room during a transaction a buyer is able to receive access to diligence materials faster than they could move their review team onsite. In addition, the buyer can provide access to multiple parties (accountants, lawyers, etc.) who could then review the information concurrently rather than going through binders one at a time. The VDR allows the seller to retain a high level of security on their corporate information during this review process by allowing them to set up various secure access levels and monitor each individual's activity. If new information needs to be included during the review process the seller can easily make the additions to the VDR rather than making multiple paper copies to distribute. The virtual data room format also allows for quicker sorting of the information through the utilisation of a built-in search feature. This can be helpful for both the buyer and the seller as they try to locate key information during the transaction.

Virtual data rooms have become one of the most necessary tools today for the efficient and legally defensible purchase of another company. It's not surprising that more than 30 percent of the M&A deals done worldwide using a VDR are mandated by the buyer. We expect that trend to accelerate as more people take advantage of technology and services to reach a valuation and buying decision.

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About Merrill DataSite

Merrill DataSite , a division of Merrill Corporation is a comprehensive virtual data room (VDR) solution that accelerates the due diligence process by providing a secure online document repository for confidential time-sensitive documents. It overcomes the many limitations of a traditional paper data room by enabling companies to present critical business information to multiple prospective buyers in a secure Web-based environment. Merrill DataSite was created to meet its clients' needs and built to their specifications. As a leading provider of VDR solutions worldwide, Merrill DataSite has empowered 2 million unique visitors to perform electronic due diligence on thousands of transactions totaling trillions of dollars in asset value. Merrill DataSite is ISO 27001- certified.