Investors look over a variety of investment deals every year. They are often faced with a lot of questions and require a place where they can go through documents and make quick decisions. A data room makes due diligence much faster it reduces friction and can be a huge benefit for both parties.
Investors can access crucial documents from anywhere in the world. This global accessibility increases competition for the acquisition of the company and allows them to negotiate a more favorable price than it would be when the company could only be purchased by investors located in one country or region.
In the majority of cases, if an investment banker or private equity firm is working on an important M&A deal with multiple investors and other third parties, they’ll use a VDR. A VDR for investment banks could provide a greater level of supervision to ensure that everyone involved in a project is on the same page and avoid duplication of efforts.
Investment bankers can monitor the activity in real-time, gaining an understanding of who is working on what projects, where problems arise and if important information is not being provided. This is a major aspect of assisting companies in closing M&A deals quicker and increase overall efficiency.
The need for an investor data room is a question that is highly debated in the startup world. Some VCs, such as Mark Suster, argue that having an investor data room slows down the process, as it provides an excuse for investors to and haw over the details, which can delay a decision.