A Virtual Data Room, abbreviated as VDR is the primary tool of the trade for any M&A professional. VDRs are specialized solutions used to share huge volumes of sensitive files and documents that are an evitable part of the M&A process of deal making. The use of data rooms helps in reducing the associated burdens and risks involved in the disclosure of confidential documents during the process of due diligence in an M&A transaction. Usually, the newcomers to investment banking and to the world of M&A have to go through the complex task of managing the documents, disclosure to the correct parties within the due diligence process under a managing director more often than not.
Though it is now a widely accepted fact that data rooms are indispensable for M&A transactions, most investment bankers and M&A advisors assume that all VDR’s are the same. However, the differences in the prices have a substantial impact on the versatility and the value that you get from your VDR.
VDR Pricing – Explained
The cost and pricing structures of the virtual data rooms are usually the same as your internet and cell phone plans. There is a base fee and you may have to pay extra fees for extra features that you need. Some of the vendors also provide some unlimited features that enable you to use the VDRs for various projects and cases at an agreed predictable cost. While the requirements and the proposed solutions are being assessed you might dig and find further information about the way you will be charged for eg. on the basis of the page, the storage size, the number of users and the project duration, etc, so that you do not incur any unexpected expenses and overages in the middle of the deal.
Now that we have discussed the basis on which VDRs are based, let’s have a look at some of the other aspects.
The Importance of Support in VDR Service
When you have to evaluate your VDR service, the support and the extent of it being provided to you as an end customer/ administrator and also to the end-users/ third parties who access and review your documents, need to be considered. M&A is not a process that is limited to a specific time of the day. The parties involved in the deal need to be able to access and review the documents whenever they need to and hence it is important that they get seamless vendor support 24/7 without any waiting times or delays.
Many generic tools that facilitate file sharing may also look good in handling the due diligence process however these tools may not be able to help you meet the changing demands of the M&A process where time is of paramount importance and you can’t keep waiting for the provider to get back to you to resolve an issue. As such you might want to choose a VDR service with specialized expertise and support in making sure your urgent M&A transactions are handled with urgency at all times.
VDR Pricing Checklist
Now that you have a fair idea of the virtual data room pricing baseline, let’s list all the metrics based on which almost all VDRs typically charge for their services:
- By the pages, you are storing (extra charges to exceed the set page limits)
- By the number of licenses you get (extra charges for every additional user)
- Storage Size determining the GB space you need to store your files and documents
- Duration of the VDR transactions i.e. you purchase it for 3/6/12 months initially and then pay onthly based on the services you take.
- Customer Support and Service Levels i.e. the extent and the availability of customer service to both the customer and the third party users.
- The number of M&A transactions i.e. the number of requests that you anticipate or will be handled by the VDR, based on which you pay as you use or take unlimited plans.
- Any additional professional services such as archiving to DVDs or other digital means.