This article will analyze the stages of M&A transactions, what needs to be controlled when signing them, and how transactions are structured to reduce risks. We will consider the role of data room software in such deals.

The peculiarities of M&A deals organization

The organization of a typical merger or acquisition process is divided into three main phases: preparation for merger and acquisition, transaction, and integration of companies. Each stage of the company’s transformation has its characteristics and involves several measures that complicate the formalization of this process and the calculation of risks during the reorganization.

To minimize the risks of deals, they must first be properly structured. We are talking about evaluating M&A transactions from different points of view – legal, economic, tax, etc., followed by an analysis of weaknesses and their subsequent elimination. During such procedures, business-critical data is processed. Therefore, the need to organize a secure collaborative workspace arises. In this case, a virtual data room is a perfect alternative. This digital platform serves as a basis for most business transactions, including M&As, IPOs, capital venture and real estate deals, due diligence, etc. 

Virtual data room in the M&A transaction

The data room is an operational management system that provides electronic M&A deal management, order execution control, project management, customer interaction, the collaboration of contractors, and many other business processes are also configured.

Having received the document for approval, the user, depending on the access rights he has, can make changes to the draft document itself, express his thoughts and comments in the comments or the form for free discussion, approve the draft or indicate the need for its revision. In working on a project, new versions of a document can be created. At the same time, all previous revisions are preserved, and there is always the opportunity to return to a previous version or track the history of changes.

How can the company benefit from using M&A data room?

The virtual data room ensures the following benefits for its users when organizing the M&A transaction:

  • The use of a single repository of information and the ability to generate standard documents according to specified templates facilitates the preparation process.
  • After preparing the draft contract, following the business processes adopted in the organization, the electronic document management system can automatically send the draft contract for approval. Depending on the additional parameters of the agreement, the route and sequence of this approval may vary.
  • Managers can get a visual report on the performance of employees when negotiating contracts.
  • When editing a draft contract, the history of the changes made and all previous versions of the draft contract is saved.
  • After the approved draft contract is registered, responsible employees will receive a convenient tool for monitoring the fulfillment of obligations under the contract.

Thanks to the possibilities for organizing external document management, remote counterparties of the organization can take part in the joint review and approval of contracts. In addition, it is possible to print a traditional approval sheet on paper. Furthermore, with the help of additional system options, the legal significance of electronic signatures on the contract is ensured. In the future, using the mechanisms of attributive and full-text search, a custom rubricator, and links of various types between documents, the system provides quick access for employees of the organization to contractual documentation under their access rights.