Investors review many investment deals every year. They are often faced with a lot of questions and require a location where they can look over documents and quickly make decisions. Data rooms can make due diligence faster, reduce friction and create a win-win for both parties.
The data room gives investors access to important documents from anywhere in world. This global accessibility increases the chance of buying the business and aids in negotiating an attractive price as opposed to if the company was only available to investors in one region or country.
In the majority of cases, if an investment banker or private equity firm is working on a large M&A transaction with several investors and other third parties, they’ll use a VDR. A VDR for investment banks could provide greater oversight to ensure that everyone working on a project is on the same page and avoid duplication of effort.
Investment bankers can also track their activities in real time to gain a deeper understanding of who is working on which projects, what are the bottlenecks, and if they’re not getting the right information. This is a major part of helping companies to close M&A deals more quickly and increase overall efficiency.
If you should or don’t need an investor data room is a topic that is debated extensively in the startup world. Some VCs like Mark Suster, argue that having an investor data room slows the process because it is an excuse for investors who want to hem and haw over the details and delay a decision.