Virtual Data Rooms: Used in 35% of Corporate Transactions, Mainly for Larger Deals

12. September 2013

Virtual data rooms are already being used for 35 percent of all critical corporate transactions, and most of involve larger transactions. Drooms also recommends the use of virtual data rooms for small and medium-sized transactions.

Virtual data rooms are already being used in 35 percent of all critical corporate transactions, such as commercial real estate sales and mergers and acquisitions, according to a recent study* of European business executives by the software and consulting firm Drooms. Most of these, however, involve large transactions. Drooms Managing Director Jan Hoffmeister sees room for further adoption, given that 72 percent of those questioned consider the use of a virtual data room during the execution of corporate transactions to be either important or very important.

Hoffmeister says that the use of virtual data rooms has now become standard practice for top-level corporate transactions. A recent example, he points out, was the sale of 16 ProMarkt stores to the REWE Group, which was handled through the Drooms virtual data room. Major transactions often involve careful vetting of thousands of documents by scores of due diligence specialists working simultaneously. Virtual data rooms can provide thousands of participants from both the buyer and seller sides with controlled, concurrent access to the documents needed to complete a transaction. This allows complex and highly sensitive reviews to be carried out much more easily, faster and more transparently, Hoffmeister points out.

“The benefits associated with the use of virtual data rooms have not yet caught on with small to medium-sized transactions. But data rooms would be worthwhile for these deals as well, because it can help save a great deal of time – particularly when you’re working in real time,” Hoffmeister emphasises.  “When you’re dealing with potentially thousands of documents, as is often the case, a lag of just a few seconds in displaying a document would cumulatively result in several weeks of lost time. Even where just a medium-sized real estate transaction is involved, potential savings of more than 100,000 euros can be realised very easily by displaying documents in real time.“

Standardised processes are in fact arguably even important for small transactions, as not only the display rate ensures greater speed. “More important factors in processing efficiency include, for instance, consistent, regulated procedures, properly ordered, and centralised round-the-clock document access, a sophisticated authorisation policy and an integrated question and answer tool,” Hoffmeister adds.

*The recent study, “Business-Critical Transactions and Virtual Data Rooms – Trends 2013” was conducted on behalf of Drooms. The study surveyed 100 professionals and managers of the European economy.