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Traditional Virtual Data Rooms for M&A, Beneficial or Disruptive?

Virtual Data Rooms (or VDRs) are secure, cloud-based storage systems for confidential information. They are becoming more and more popular for M&A partly because they greatly improve the flow of information between stakeholders. While there are plenty of VDRs on the market, very few are actually designed with the complexities of M&A in mind.

The Future of M&A Virtual Data Rooms

Moving into 2019 especially, the deal space is very active, and deals are predicted to become larger and more multiplex. This means M&A practitioners need more than a place to simply store information; they also need ways to reduce wasted time, workload, and the potential for human error as they navigate the waters of due diligence.

Ultimately, DealRoom is the platform of the future of M&As because it is designed to make complex deals simple with its Agile approach. Consequently, it is has been utilized for billion dollar transactions and is suitable for deals >50M where there is a greater need for diligence and integration process management.

How Modern Virtual Data Rooms are Changing Due Diligence

Based upon the Principles of Agile M&A Project Management - iterative, customer-focused, accountable, flexible, and transparent - DealRoom’s platform, designed by M&A professionals for M&A professionals, is changing the world of due diligence and helping M&A practitioners close deals faster. Here is how:

1. Simplified Process:

DealRoom’s sophistication lies within its centralized location that simplifies many of the roadblocks of due diligence. For instance, it allows for clear communication, data storage, and document transfer - in simpler terms, an end to the time-consuming and outdated back-and-forth email game. Perhaps most importantly, DealRoom helps deals come to completion 40% faster!

2. Eliminated Work & Increased Communication:

More than just a data room, the technology behind DealRoom streamlines communication. Imagine the elimination of duplicate requests, the ability to clearly, and easily, assign tasks, drag and drop documents in bulk, and live link documents; all of which can save users up to an hour a day.

More specifically, stakeholders no longer need to rely on unmanageable spreadsheets that are not conducive to collaboration and transformation. While well-meaning, spreadsheets often lose value and become unwieldy as the process of due diligence picks up steam; therefore, DealRoom’s platform is ideal for workers who want to stay organized and work methodically.

Additional features such as full text search, auto indexing, and the power to produce PDFs and Excel reports with the click of a button continue the trend of minimizing and reducing workload.

3. Reduced Cost:

We’ve all heard the old adage “time is money” and without a doubt eliminated work and reduced distraction allow for businesses to concentrate on maximizing growth by reducing wasted time and money.

However, DealRoom’s platform efficiency is not the only way the program helps companies lower costs: DealRoom also moves users away from antiquated per page pricing models.  Per page pricing methods are not only expensive, but also can be harmful to the development of deals since stakeholders are often focused on the expense of scanning and uploading the data rather than focusing on the data itself.

On the other hand, the flat rate pricing model reflected in DealRoom’s platform means expenses can be effortlessly planned for so stakeholders can focus on the actual data and avoid the financial burden of additional “surprise” costs; with DealRoom, there are no hidden fees or penalties for extensions.

Lastly, DealRoom is approximately 50% less expensive than a traditional Virtual Data Rooms (or VDRs), all while offering unlimited data and users, advanced analytics, and 24/7 personalized support. With monthly and annual billing plans, companies can effectively plan and budget M&A expenses.

4. Focused Analytics:

Project management becomes simplified thanks to heightened oversight. This “bird’s eye view” enables all involved to take on more proactive roles and identify potential holes in the project before they become major issues.

One of DealRoom’s most impressive features is the ability to track what others are regularly viewing and spending their time on analyzing. The data produced from this tracking is invaluable - now the buyer’s level of engagement and areas of apprehension can be predicted, understood, and proactively addressed.

This view of the process also means an easier way to track overall progress. In fact, collected and highlighted statistics update users on the total number of requests completed as well as providing a breakdown of the requests.

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Project Management Software

What Causes Deal Fever? What Raises the Risk?

There are several symptoms that can lead to the disease of deal fever. 

One such symptom of deal fever is getting carried away in the heat of the deal. There is a lot of time and effort spent just exploring a potential deal, let along the negotiations involved. Sometimes people spend so much time and effort on exploring and negotiating the deal that they feel is must get done at all costs, while failing to take a birds-eye view in determining if the deal is really the best thing for the company.

Another symptom indicating the presence of deal fever and one that raises the risk of catching it is when certain executives become more excited about the deal and emotionally involved in the outcome than other members of the group. This can lead to inflating the deal’s potential strengths instead of also focusing on potential pitfalls. In a competitive situation, sometimes certain people want to do the deal much more than others for a variety of reasons. 

Many M&A teams also use M&A software to help them source new deals. Just because a software is telling you a deal is a good idea, that doesn't mean you don't have to do the proper research.

How to Prevent Deal Fever

Great news! There are a number of proven ways to prevent deal fever and keep your company disease-free. Here are some tips to stay deal fever-free:

  • Perform More Research Than You Need To. You can never perform too much research on a potential deal, so we recommend doing even more than you think you need to.  
  • Seek The Opinion Of Experienced Deal Makers. Get another opinion from someone you trust that has embarked on similar deals. What do they think of the deal? Seeking another opinion that can evaluate your potential deal without the emotional involvement will help you ensure the deal is truly one you want to pursue!
  • Know All Of The Potential Risks. Thoroughly evaluating the deal’s potential risks, and involving your team in the process, will help you avoid deal fever. Don’t lose sight of your basic financial calculations! Involving others in the process is essential, as you want to make sure nothing is overlooked and you can remain deal fever-free. 

Resist deal fever by not overlooking the negatives that you may not want to see! If you have been the primary person working on the deal, make sure you involve others so they can help assure that you are seeing everything clearly. There should never be one person working on deal flow tracking. Likewise, don’t let personal pressures to get the deal done get in the way of looking at everything objectively. Sometimes, not doing the deal may be in the best interests of the company.

How to Tell When You Have Deal Fever

Do you have a high degree of risk tolerance? Do you have a burning desire to get the deal done, yet something just doesn’t feel right about it but you’re not sure what? If so, you may be catching a slight bout of deal fever.

Having the above feelings isn’t just exclusive to individuals, either. Many companies surveyed believe that their M&A function of getting the deal done is more important than what follows. If you’re in the M&A department, and you’re not performing M&A’s, something must be wrong, right? No, not necessarily. Inherently good deals are difficult to come by and you may have to pass on many of them before you find the right fit.

If deals contain personal agendas or emotions, or your company provides more incentives and encouragement to do the deals rather than not, than these are signs that your company may have deal fever. Recognize the signs so you can avoid deal fever and ensure you are making deals that have the highest chances of future success for your company.

Deal Fever

Treatment, Care & Medications For Deal Fever

Below are some treatment, care and medications for this contagious disease known as deal fever:

  • Treatment Option 1. Ensure your deal team is incentivized for long term success, and not just for completion of the deal.
  • Treatment Option 2. Have objective, experienced observers review the deal specs, including all of the potential negatives of doing the deal.  This way you can help ensure you’re not overlooking potential pitfalls.
  • Treatment Option 3. Let post-close executives have direct input into whether or not the deal goes through
  • Medications For Deal Fever. Create clear action steps that are to be taken when considering all potential deals. Create a set of red flags, or things to be looked at more closely when they occur. Finally, a healthy dose of objective observation by people not directly involved in the process will both help prevent and cure this debilitating disease!

A very important aspect in our guide on deal fever is to cultivate a business culture in which you have both risk tolerant and risk averse individuals on the team, with both groups having equal say. When both groups sign off on a potential deal, and it is also reviewed by an objective observer, you know you might have a winner!

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Don’t Underestimate the Power of Diet, Exercise & Rest

One of the most important ways to prevent deal fever that is often overlooked is to ensure you have a good diet, and are getting enough exercise and rest. Doing so will keep your mind and body in tip top shape, and will help alleviate some of the pressures incurred from pursuing and evaluating a potential deal. 

M&A deals are complex transactions that often go at a very fast pace and can also be emotionally charged, so ensuring you’re eating well, exercising and getting enough rest can help counteract the pressures of working on the deal.

The Takeaway

Many M&A management can sometimes lack a truly accountable leader to oversee the process. Having a great leader, coupled with the goal of long term success instead of short term, are the highlights of the best things to do to not get infected with this crippling disease. Set the criteria for success and focus on that more than focusing on doing the deal just to get it over with. Make sure your team is incentivized on long term goals and are not acting out of the fear of “what if we don’t get this deal done.”

If you and your team are currently managing M&A transactions, check out DealRoom's M&A virtual data room and project management software. DealRoom's platform also includes pipeline and integration management, which helps teams organize deals for their entire lifecycle.

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