Virtual data rooms, or VDRs, have become an integral tool for successful M&A transactions.
Let’s first define VDR; a virtual data room is a secure online, cloud-based, storage center for sensitive documents. Traditional VDRs can be appropriate for smaller deals, but most practitioners would agree for larger deals a Deal Room is more desirable.
What is a Data Room?
Similar to a VDR, a data room houses sensitive data for companies. While most companies now rely on virtual data rooms there can also be physical data rooms and centers.
To truly transform your M&A practice though, you need to move beyond a VDR or data room to a Deal Room that leverages a platform designed specifically for M&A. In fact, the best Deal Rooms can help deals not only close faster, but also better prepare for integration.
What is a Deal Room?
A Deal Room or M&A Virtual Data Room (VDR M&A) is a data room designed specifically for the complexities of M&A. Sometimes it is also called a due diligence data room.
VDRs provide M&A professionals with a solution for sharing large amounts of sensitive documents, easing the burden of having to collect and disclose confidential information during the due diligence process. VDRs also modernize and streamline document management for complex, information-heavy M&A deals.
VDRs are commonly used by professionals in corporate development, private equity, and investment banking. The market for VDRs is increasing steadily as the need for simple, secure and efficient data storage and sharing grows.
But, how much should a VDR cost?
Depending on the project and vendor, VDRs can be astronomically expensive.
VDR Pricing Structures Must Evolve
Virtual Data Room Pricing
Most VDR vendors still rely on per-page pricing, a pricing structure heldover from the day when providers must be onsite to make copies of physical documents. Depending on transaction value and size, per-page pricing can cost anywhere between $20,000 to $40,000. We have also all heard stories of invoices well over $100,000, due to overage charges and extended timelines.
M&A professionals, as well as their clients, have learned to swallow large invoices from data room providers. However, VDR technology is advancing, and it’s time their pricing does as well.
As VDR technology continues to advance, their pricing structures must as well.
Ultimately, a project’s value, size and duration will determine Virtual Data Room price. What average VDR cost structures should M&A professionals expect? What functionality should a Virtual Data Rooms for Mergers and Acquisitions have? And, as the VDR market continues to grow, what should VDR invoices truly look like?
Virtual Data Room Pricing Structures
Virtual data room costs and pricing structures vary by vendor. Generally, VDR cost is structure by one or a few of the following:
Many providers rely on the per-page pricing model. Depending on the scope of the project, these providers will typically charge between $0.40 and $0.85 per page. This pricing structure may be attractive for small projects with a clear or set number of documents. However, for larger projects, this model can lead to large invoices and overage fees.
Some VDRs will provide a set number of user licenses and will charge extra for each additional user. The number of users provided and the price for overages vary widely by vendor. Typically, data rooms will charge between $100 and $250 per administrative user. Before choosing a data room provider, it is important to check how many users the room will allow without charging extra.
3. Storage Size
Data room storage size is another way some VDR providers determine cost. Certain VDR providers set a cost structure based on the number of gigabytes (GB) the room uses. Other providers may allow of a certain number of GBs, or provide a range, and charge for overages if the need arises. Overages can cost as much as $75 per GB. This may be a good pricing option for projects with relatively small text file sizes.
4. Flat Monthly Fee
Other VDR providers simply charge flat monthly fees. These plans typically allow for unlimited data, pages and users and cost between $500 and $1000 a month. Many projects can be unpredictable is size, scope and duration. VDR providers that charge flat monthly fees enable teams to save money and avoid large overage fees, that way they can focus on what’s best for their project. For example, Sharefile VDR pricing is $338/month and includes 5 employees and 5 GB of storage. Another example is Ideals virtual data room, which starts at $175/month and includes 500MB of storage, 10 guest users, and 2 administrators. And if you ever need a free virtual data room for a smaller project, check out Google Drive.
Flat monthly fee pricing models are ideal for extensive projects with unknown or extended timelines. View our virtual data room cost calculator to determine if you’re paying too much.
When comparing online data room providers, cost is an extremely important factor. Cost between providers can fluctuate extremely and can leave you wondering what the difference is between them. The difference may just be a more equitable pricing structure.
As prices evolve, teams should compare the following features to make sure they are getting the best deal possible:
Virtual data rooms must be secure as security is a data room’s main purpose of being. VDR security may be the most important function to compare when choosing a data room. It is essential to look for data encryption level, watermark capability, secure document storage, authentication technology, and ability for document recovery.
2. Data Management
Sensitive data management capability is the second key factor to compare between data room providers. When selecting a data room, it is important to consider how easy it is to upload and download documents to and from their platform as well as their editing, documents indexing & folder structure, search abilities.
3. Project Management
Many teams need more than simply just a data room. Certain providers offer virtual data rooms with integrated project management capabilities, not only storing your data but also streamlining your process and communications, both internally and externally. VDRs with project management software allow teams to interact more efficiently, plan next steps, delegate workflows, and organize individual tasks. When looking for a provider, expect more than your just a platform to securely store data.
The last thing a team wants to do when beginning a project is to learn a new, complex m&a software. Data rooms should make life easier and be user friendly. Look for virtual data rooms with intuitive, easy-to-use platforms with 24/7 chat, email, phone, and other customer services. Additional virtual data room features to look for are view only access, convenient document sharing, project management, granular analytics, and simple permissions.
Virtual data rooms should track important information and create meaningful analytics. During M&A transactions, it is often essential to understand which users and buyers are most engaged and which documents they view most. VDRs with analytic capabilities can lead to more informed decisions and aid the integration process.
6. Software Integrations
Certain providers allow for the integration of other commonly used softwares onto their platform, such as Microsoft Office, Salesforce and chat tools. Software integration will increase functionality and allow you to get the most out of your data room.
Virtual Data Room Costs Must Evolve
Astronomically expensive data rooms that center around per-page pricing models will hopefully become a thing of the past.
20 years ago, virtual data room software providers physically scanned and uploaded documents onto costly servers. Today, everything is digital and the cost of cloud storage is at an all-time low of $0.002 per-page. Data room providers charging between $0.40 and $0.85 per page are making an incredibly high profit margin without necessarily providing the best technology and room quality.
As VDR technology evolves, their pricing models must evolve as well. Flat monthly fees, for example, allow deal teams to worry less about data, user and time overages and more about what is best for their deal.
So, let’s take a look of most popular data room providers on the market right now.
List of the Best M&A Virtual Data Room Providers
Merrill Datasite VDR
The VDR market is quite crowded, and we know any old VDR cannot truly transform your M&A process. Considering user reviews will help you navigate these crowded waters. To simplify this search we have compiled a list of the top VDR providers for M&A based on both user reviews and overall popularity.
The full list of data room providers can be found on Capterra. Please note: not all of them follow the flat rate pricing system.
Let’s Compare the Prices of Various Data Room Providers
Here we provide a basic overview of the pricing systems of popular data rooms. Using this chart you can also easily compare some of what is included in their pricing.
As you can see from the table, very few providers offer unlimited users and unlimited data with their base or subscription fee. In fact, only DealRoom, FirmRoom, and Securedocs do so. With this in mind, if you have a large project, adding users can become quite expensive. Similarly, worrying about the expense of scanning and uploading data can be harmful to your deal.
What We Suggest to Do Before Choosing a Data Room
Before selecting a data room we recommend you look closely at the following:
Security should be your primary focus as security breaches in security can ruin deals and hurt companies financially. We recommend a data room that not only has customizable file access privileges, but also is ISO 27081 compliant and boasts strong encryption methods.
2. Ease of use
Your data room should be simple to set up and intuitive. Most companies and teams do not want to spend too much time learning a new tool, therefore, select a data room that will allow you to focus on your business not learning a cumbersome platform.
3. Features that will meet your team’s needs
Before you purchase a data room be sure to analyze how your company and its teams function and where teams could use support working methodically and efficiently. For instance, some data rooms will provide templates, checklists, and playbooks and others will boast project management features.
Though we have provided an overview of data room pricing systems, it is important to reiterate the importance of considering pricing when selecting a data room. Surprise costs can throw a wrench in projects and deals, therefore, we recommend flat-rate pricing and carefully investigating your VDR to ensure there won’t be any “surprise” fees. Consider your budget and then search for data rooms within your range.