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To effectively use virtual data room software, you need to adhere to some recommendations. In this article, we will analyze the most common data room rules.

What is a data room?

A mandatory element of the “digital” infrastructure of a modern enterprise or organization is a document management system. Work with external and internal documents is referred to as the most complex, labor-intensive, and “problematic” area of enterprise activity. Digital solutions like virtual data rooms make it possible to significantly simplify and optimize it.

The data room is a place where the potential buyers have controlled access to certain confidential documents related to the company for sale. By having access to these documents, the prospective buyer (and his advisors) can read the documents and do his due diligence.

Cloud computing has also changed the possibilities for building the data room. Today, in regular M&A processes, one mostly encounters virtual data rooms in which all documents are made available in digital form and are accessible online around the clock. The virtual data room offers various advantages. This makes the due diligence check more efficient and transparent. This also makes it much easier to address international prospects. Each inspection area can be viewed simultaneously by potential buyers and their advisors from anywhere in the world with no travel time or expense.

Facilities and documents organization on the platform

Since the data room contains sensitive company documents, its use in professional M&A processes is subject to certain rules. The purpose of data room rules in the case of a company acquisition is to find a suitable way for the potential buyer to access the information and documents requested by him in his due diligence questionnaire. The users of the software undertake in writing to comply with confidentiality and the data room rules. They are as follows:

• Each buyer must name the data room users;
• No documents may be removed from the data room;
• Only transcripts are allowed, no copies or photographs;
• The number of data room users is limited;
• Each user must sign the data room rules;
• Most stored documents are accessible only with reading authorization.

Assigning access rights to a document in a data room

Rights to a document must be assigned following the organization’s privacy policy and the intended future use of the document. When assigning access rights to a document, it is recommended to adhere to the following rules:

• in general, viewing rights should be given to all users (groups of users) who may need this information to perform their job duties;
• the rights to change documents must be given to those users who will participate in the development or approval of this document, as well as to users who will register the document;
• Full access to the document is recommended to be left only to the author of the document and the person responsible for this document.

Best practices for using folders to store tasks in a data room

The placement of tasks and tasks takes place in personal folders, so it can be individual for each user. However, some general recommendations can be made:

• remove links to completed tasks and tasks from the Inbox/Outbox folders as soon as they are completed (return to them by searching as needed);
• select subfolders for non-urgent tasks and tasks sent to other employees in the form of subtasks in the Inbox folder;
• transfer to personal folder links to the Inbox folders of those employees who have to be constantly monitored.

Nowadays, the merger of companies is the leading technique for the successful development of one’s own business. Almost all successful companies use it today. So, how exactly this process takes place, and what are the advantages of mergers and acquisitions with examples, we will consider below.

Why do companies choose M&A business strategy?

In the distant 90s of the last century, there was a change in the course of many companies. The concepts of flexibility and agility receded into the background, and instead of these well-established principles, new ones came: expansion and growth. All large companies sought to find an additional source of expansion of their activities. It was during this critical period that the concept of “merger and acquisition” (M&A) appeared.

The meaning of M&A deals is to get the maximum amount of all the benefits from cooperation. In an example, it looks like this. Two organizations combine their efforts and create one, while they optimize personnel, reduce the number of employees, due to this first step, there is a tangible saving of material resources.

The M&A of companies have their characteristics, which differ from each other. In a merger, there is always one dominant company that initiates the process. Such a corporation has a large capital and the necessary capacities. In an acquisition, a corporation that conquers smaller organizations acts as follows. The absorber redeems all the shares of the company from the shareholders who created this enterprise.

The business benefits of M&A transactions

M&A transactions can be traced back to five main business opportunities:

• The first opportunity offered to companies is to gain know-how. This includes both the expansion of existing and the development of new patents and products as well as the mastery of new technologies and processes.
• The second chance for companies is restructuring. This means that departments or divisions with weak sales or profits are outsourced. In 2012, Volkswagen took over Porsche’s automotive business for €4.5 billion. This transaction could be shown as a restructuring measure and the sports car manufacturer could pay off its debts from the plan to take over the VW group.
• The rationalization potential is seen as a third chance. This means that double work can be saved, high costs for research and development avoided or better conditions can be negotiated with suppliers. In this case, the so-called economies of scale are used. In 2006, telephone giant AT&T took over BellSouth for €65 billion. This deal was the largest in the American telecommunications industry. The takeover was expected to eliminate 10,000 jobs. This saved unnecessary costs for double work and strengthened competitiveness.

Creating brand value through M&A deals

M&As have always played an important role in global business. But are they solid strategies for increasing brand value? Among the top 20 brands with the strongest brand value growth in recent years, according to Interbrand, are acquisition brands such as Google, IBM, Oracle, HP, and Philips. However, there are still brands that target their existing businesses such as Apple, Nintendo, ADIDAS, and Audi.

Like most strategic initiatives, M&As can be used effectively to drive a business. Looking at the world’s most valuable brands of 2011, Interbrand concluded that companies benefit enormously from focusing on building their brands. The issue is not that the deal creates brand value better than other alternatives. The main thing is to look at M&A through the lens of brand value creation to understand whether M&A and spin-offs make sense.

In many transactions, especially those involving a large investment in IT products, technical due diligence is an obligatory part of the investment process. In this article, we will discuss the basic aspects of software due diligence.

The purpose of the software due diligence

Software products are at the core of value creation for many modern companies. The development and maintenance of these products cost resources that must be assessed before investing as part of software due diligence.

Technical or software due diligence (DD) is a comprehensive analysis of the company’s IT products by independent certified experts, as a result of which vulnerabilities and shortcomings of these products are identified, business risks associated with them, and recommendations are developed for their minimization and elimination. Software DD includes the systematic recording and assessment of the existing IT (hardware, software, networks, resources, processes, locations, projects) and the data protection organization of a company. It also aims to show the value and strategic benefit that IT has for the company. Digital DD is currently of great relevance for online platforms, retailers, and other online companies.

The procedure is required in the following cases:

• investment in IT projects (software, games, etc.);
• buying/selling an IT company;
• preparation for joining the HTP (for a separate category of applicants – crypto and blockchain projects);
• Confirmation of compliance with local and international standards (PCI DSS, HIPAA, ISO 27001, SOC 2, GDPR, etc.);
• making a big deal.

Software DD may include reviewing various technical aspects of a product IT company. When an investor enters the capital, the widest possible list of issues is subject to study, allowing an analysis of all the risks associated with the technical aspects of the company’s IT product itself. The impossibility of scaling the system, the likelihood of security incidents, the complexity of support, or critical vulnerabilities in the system can serve as a serious reason for bargaining or rejecting a deal. Depending on the goals of the audit and the scope of the software product, it is possible to limit the list of works included in the technical audit, for example, the HTTP requirements for the audit of information systems of a certain category of applicants focus mainly on security issues.

Digital business models: from product to information and services

Digitization has not only fundamentally changed the business models of companies, but also has an increasing influence on due diligence reviews in the context of corporate transactions – especially in the commercial context.

The following questions should be asked as part of a procedure:

• Can the company increase its online profits in the future?
• Is it prepared to reach new, digitally affine target groups?
• Is digitization already part of the business model?
• If not, how easily can this be integrated in the future?

On the one hand, the proportion of purely digital companies in the portfolios of private equity companies has risen sharply in recent years, on the other hand, traditional companies are increasingly exposed to digital changes and more intense digital competition. However, these digital components and factors influencing the business model are often criminally neglected in classic companies from the non-digital environment in the context of commercial DD checks.

Among other things, this means that market attractiveness and the competitive environment are misjudged, growth risks are not recognized and disruptive changes are carelessly misjudged. For this reason, it is essential that a clear understanding of the acquisition company’s business model is gained at the beginning of any commercial DD and that digital checkpoints are integrated into the process to validate “digital readiness”.