Data management is a core concern for every business, and over the last several years with the expansion of big data, this has become an even bigger challenge. As a result, team members across different departments and with varying needs and interests regularly find themselves collaborating on questions of data acquisition, storage, sharing, and privacy, among other issues.
That being said, there are many different data management strategies, and it can be difficult for businesses to collaborate because of their varied approaches. One tool that can help bridge this gap, though, is the use of virtual data rooms.
Data Rooms – An Introduction
Data rooms are a common tool used in mergers and acquisitions (M&A) and, in the original sense, the term refers to an actual room where confidential documents are housed, along with an area for facilitating financial transactions.
These rooms are used when businesses need to perform due diligence prior to finalizing an M&A process. Today, however, most data isn’t physical, businesses hold much more documentation overall, and most M&A processes don’t take place in person.
That makes physical data rooms somewhat impractical and outdated, but virtual data rooms offer a savvy solution.
Virtual Data Rooms – The Transition
Given the increasing irrelevance of physical data rooms, it makes sense that virtual data rooms would be growing in prominence, but how do these platforms work exactly?
In essence, virtual data rooms are very similar to the physical ones, in that they support document management for M&A processes, as well as contract negotiations, and they do so by insulating these tools with multiple layers of digital security.
Instead of piling boxes into a room, authorized users can handle the due diligence process remotely.
An Industry In Flux – Moving Towards Automation
Due diligence doesn’t sound like a process that one can automate, given the complex judgments and high stakes involved. With all the changes involved in the industry, however, many predict that M&A processes will increasingly rely on some degree of automation.
Essentially, automation may allow businesses to use public databases and internal calculations to scrape and run large quantities of data to identify strong M&A candidates. From there, if M&A proceedings are initiated, it’s much easier for the acquiring business to evaluate and confirm a candidate company’s status.
A Multi-Industry Solution
We typically think of M&A processes as being within the purview of finance companies and various publicly traded businesses, and while they certainly happen elsewhere, most people never notice when these occur.
That being said, many more mergers happen during any given year than even savvy business professionals are aware of, which is what makes these platforms so valuable. For example, virtual data rooms are an ideal tool for healthcare systems, many of which have been subject to takeovers by larger medical networks in recent years.
Over the last several years, in-person business processes have become far less important to companies’ day-to-day activities, even to the most high-stakes events, and that trend will only continue to accelerate as time goes on.
Given this, it’s likely most businesses will find value in the secure but collaborative structure of virtual data rooms, as physical data rooms recede into the past.
