Investors review many investment deals a year. They have a lot of questions, and require a place to look over documents and make decisions quickly. Data rooms can make due diligence quicker, reduce friction, and be an all-win situation for both parties.
The data room allows investors to access important documents anywhere in world. This global access increases the possibility of a purchase for the company and allows for negotiation of the best price than if the company was restricted to investors only in only one country or region.
In the majority of cases, if an private equity or investment banker firm is working on a major M&A deal that involves many investors and other third parties, they’ll use a VDR. A VDR for investment banks could offer a higher degree of supervision to ensure that everyone working on the project is on same plan and avoid duplicate efforts.
Investment bankers can monitor activity in real time to gain an knowledge of who is working on which projects, where bottlenecks exist and if crucial information is not available. This is a major aspect of assisting companies in closing M&A deals more quickly and increase overall efficiency.
If you should or don’t need an investor data room is a question that is debated extensively in the startup world. Some VCs like Mark Suster, argue that having an investor data room impedes the process because it is an excuse for investors who want to hem and haw over the details and delay a decision.